Washington's March suit against Kalshi tests federal preemption of gambling laws
Washington state sued Kalshi on March 27, arguing its event contracts violate state gambling restrictions. The suit tests whether CFTC-regulated platforms can operate under state gaming laws. It follows an August 28 Ninth Circuit ruling against Kalshi in Nevada that categorized sports event contracts under state law. Kalshi's brand partnerships with the San Diego Padres and other teams have drawn judicial scrutiny; the Ninth Circuit cited Kalshi's own advertising language in finding a Padres partner offered illegal gambling through event contracts.
Washington's suit opened a third front against Kalshi's federal preemption defense, after Connecticut's filing and the Ninth Circuit's Nevada and California tribal losses. Every new state action weakens the platform's argument that CFTC designation shields it from local gambling law. Kalshi must now split legal resources across parallel state cases that compound faster than any single resolution.
The Ninth Circuit's repeated rejections give other attorneys general a ready template; each filing emboldens the next. Traders hold positions whose validity shifts with state borders, not regulation. The Supreme Court petitions from Crypto.com and Robinhood seek a single federal answer, but delay risks more bans before any cert grant.