Kalshi Faces Another State-Level Lawsuit Over Alleged Gambling Law Violations
Kalshi, a prediction market operator, is facing another state-level lawsuit after Washington state made allegations on Friday that the company violated the state’s gambling laws with its products. This lawsuit is the latest in a series of legal challenges faced by Kalshi, with several other states also taking action against the company.
The Washington attorney general’s complaint cites the Pacific Northwest state’s existing ban on online gambling and otherwise strict oversight of the gambling market, alleging that Kalshi violated the Washington Consumer Protection Act, the Gambling Act, and the Recovery of Money Lost at Gambling Act. According to the complaint, Kalshi’s website and app allow consumers to bet on a range of events, with odds determining the payout for bettors if the event occurs.
“Kalshi’s website and app show consumers a range of events on which they can bet, as well as the odds for those various events, which determine how much the bettor will be paid if the event occurs,” said an announcement from Attorney General Nick Brown. “This is exactly how sports betting and other gambling operators work. Kalshi advertises that they allow consumers to ‘bet on anything’ by simply describing their service as a ‘prediction marketplace’ rather than ‘gambling’.”
Definition of Gambling and Kalshi’s Activities
The definition of gambling under Washington law is “the betting or risking of something of value on the outcome of a chance contest or a future contingent event,” and Kalshi’s activities fall precisely under that definition, the AG’s announcement said. “Every Kalshi bet risks money, relies partly on chance and promises a payout to the winners.” This definition highlights the key aspects of gambling that are relevant to Kalshi’s operations.
Front page of State of Washington v. KalshiEx, Source: King County Superior Court
State AGs and Gambling Regulators Take Action
A Nevada judge temporarily banned Kalshi from operating in the state earlier this month, finding that state regulators are likely to prevail in a lawsuit over whether the company’s event contracts violate Nevada gambling laws. Carson City District Court Judge Jason Woodbury issued a temporary restraining order, supporting a request by the Nevada Gaming Control Board to bar Kalshi from operating in the state for 14 days.
Kalshi had argued that its contracts were under the exclusive jurisdiction of the US Commodity Futures Trading Commission, an agency that supports prediction markets, which are fighting in several state courts over allegations of offering illegal gambling. However, the court’s decision suggests that state regulators have a strong case against Kalshi.
Days earlier, Arizona Attorney General Kris Mayes announced charges against the companies behind Kalshi, alleging that the company operated an “illegal unlicensed gambling business” in Arizona and offered illegal election betting. While Kalshi faces several similar lawsuits from gaming regulators in other states over the platform allegedly offering sports gambling to unlicensed residents, Arizona was one of the first to file criminal charges.
The state-level cases come at a time when prediction markets are under scrutiny from lawmakers for offering bets on U.S. military actions, citing concerns about insider information in government. As the legal challenges against Kalshi continue to mount, it remains to be seen how the company will respond to these allegations and whether it will be able to operate in the states where it is currently facing lawsuits.
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