Kalshi must geofence Washington a day after the CFTC ordered it open

What happened

Judge John F. McHale of the King County Superior Court signed an amended and updated order on 12 August 2026 granting the State of Washington's motion for a preliminary injunction against KalshiEX, LLC. The order was e-filed the same afternoon at 3.47 p.m. in case 26-2-10264-3 SEA, brought by the Attorney General's Consumer Protection Division, and Attorney General Nick Brown announced it the following day. It requires Kalshi to 'cease marketing, advertising, promoting, conducting, operating, facilitating, distributing, offering, or accepting event contracts, or other contracts, instruments, or products in Washington, related to sports, elections, politics, entertainment, culture, tech and science, or mentions', and expressly excludes the commodities, climate, economics and finance categories. Kalshi must implement IP address and residency based geofencing by 19 August 2026 and a multi-source geofencing solution provided through GeoComply by 2 September, and if it misses the second date it must either pay the state $120,000 a day until implementation is complete or file a sworn affidavit explaining why, after which the court decides whether it acted with sufficient diligence. It must preserve records including geolocation and marketing targeting data, must not prohibit users from exiting positions they already hold, must hold the status quo on transaction fees taken from Washington consumers, and must give Washington the same implementation information it gives Michigan and Nevada. No bond was required of the state. The order records that Kalshi asked the Court of Appeals to stay the injunction and that a commissioner denied the motion. Brown said that 'Kalshi has gotten rich promoting wagers on sports, elections, natural disasters, events related to the Iran War, and more' and that 'Under this order, Kalshi is banned from offering wagers on most of those topics in Washington'. A Kalshi spokesperson, Jacki McGavick, told the Washington State Standard that the company is regulated exclusively by the Commodity Futures Trading Commission and that 'We respectfully disagree with the court's decision and are considering all legal options'.

Why it matters

This is the argument the Commission's emergency order of 11 August rests on, tested in a court and rejected. That order declared a state enforcement action a major market disturbance and directed Kalshi to keep exercising its functions as a designated contract market; this order was signed the next day. Its conclusions of law take the preemption case apart in three moves. First, the grant of exclusive jurisdiction at 7 U.S.C. 2(a)(1)(A) contains no express preemption language and was enacted, on the Supreme Court's reading in Curran, to 'separate the functions of the [CFTC] from those of the [SEC] and other regulatory agencies' rather than to displace the states; the same provision carries savings clauses for state regulatory authorities and for the jurisdiction of any state court. Second, on conflict preemption, 'Complying with Washington law would not prevent Kalshi from complying with applicable Federal law', because regulating gambling and regulating futures markets are different fields. Third, and this is the part that answers the Commission directly, the impartial access rule at 17 C.F.R. 38.151(b) is read as a non-discrimination provision about access criteria and fee structures: 'An anticipated inability to match Washington traders with other traders nationwide is not discrimination in providing access on the part of Kalshi.' The court then turns the statute round on the argument, noting that the special rule for event contracts at 7 U.S.C. 7a-2(c)(5)(C)(i)(I) lets the Commission find contracts contrary to the public interest where they involve 'activity that is unlawful under any Federal or State law', which presupposes that states decide what is unlawful and implies that contracts may be listed in some states and not others. The economics of what is left standing is why this belongs on a markets page. What survives in Washington is commodities, climate, economics and finance, which is the hedging case the exchange has always made for event contracts. What stops is sports, elections, politics, entertainment, culture, tech and science and mentions, which is where the retail volume is; the order finds as fact that 'Kalshi earns a transaction fee on each bet', and records that it weighed 'significant compliance costs and lost profits for Kalshi' before ruling. The venue keeps the products it justifies itself by and loses the products that pay for them. The order also refuses the futures exclusion inside Washington's own gambling statute, holding that Kalshi's conduct is not participation in 'bona fide business transactions valid under the law of contracts for the purchase or sale at a future date of securities or commodities'.

What is not settled

This is a preliminary injunction resting on likelihood of success, not a judgment. The merits are undecided, and the state is still seeking to recover money Washington bettors lost and to assess civil penalties; the order reserves the state's right to seek recovery for fees and losses incurred on or after 2 September. Kalshi says it is considering all legal options and has already been refused a stay by a commissioner of the Court of Appeals, so whether it appeals the amended order, and on what, is open. Nothing in the order addresses the Commission's emergency order of the previous day, and no court has yet passed on whether an order directing a designated contract market to keep operating can survive a state injunction telling it to stop in one state; two federal instruments now point in opposite directions and the exchange has to comply with both. The order's own account of the technology is untested: it names GeoComply, sets two dates, and notes that Kalshi is subject to a preliminary injunction in Nevada, where the Washington State Standard reports regulators have accused it of flouting the geofence. What happens to a Washington user's open position in an enjoined category after 2 September is answered only in part, since the order permits exiting positions and account closure but says nothing about markets that settle later. One citation is worth flagging. The public health finding at paragraph 21 rests on an article the order cites as appearing in Nature, while the identifier it prints resolves to Science, where Packin and Rabinovitz published 'Prediction markets as a public health threat' at volume 392, issue 6795, pages 257 to 260, on 16 April 2026. The order's own reasoning does not turn on it.