Kalshi Faces Multi-State Lawsuits as Prediction Markets Labeled ‘Disguised Gambling’

TLDR:

• Washington state sued Kalshi on Friday, alleging its prediction market products violate state online gambling laws.
• Nevada secured a temporary restraining order forcing Kalshi to halt sports, election, and entertainment contracts statewide.
• Coinbase, a Kalshi partner, received a preliminary injunction and 60 days to comply with Nevada’s court order.
• Legal experts say the federal versus state jurisdiction clash over prediction markets may reach the U.S. Supreme Court.

Prediction markets platform Kalshi is facing growing legal pressure from multiple U.S. states. Washington state filed a lawsuit against the company on Friday, alleging violations of state gambling laws.

The filing came just one week after Nevada secured a temporary restraining order against Kalshi. Nevada also won a preliminary injunction against Coinbase’s prediction market offerings.

Legal experts now say this dispute could eventually reach the U.S. Supreme Court.

Washington State Targets Kalshi Over Gambling Law Violations

Washington state’s attorney general filed the complaint, arguing that Kalshi operates gambling products in disguise.

According to the state, Washington maintains a tightly regulated gambling market, including a ban on online gambling. The lawsuit alleges that Kalshi bypasses these regulations through its platform.

The attorney general’s office stated that Kalshi’s app displays events and corresponding odds for consumer payouts. Officials argued this model mirrors how traditional gambling operations function.

The state press release noted that Kalshi “advertises that they allow consumers to ‘bet on anything’ by simply calling their service a ‘prediction market‘ rather than ‘gambling.'”

The lawsuit further claimed that Kalshi’s products promoted gambling addiction and specifically targeted college students.

Kalshi responded by filing to move the case to federal court. The company said it was already litigating similar issues in other federal courts at the time.

Kalshi’s head of communications, Elisabeth Diana, addressed the attorney general’s claims directly. “If AG [Nicholas] Brown hadn’t sued us ahead of our scheduled meeting with him, he would have known better than to say we offer war markets. We don’t,” she said.

Diana added that the suit itself only named a contract about when Iran’s former Supreme Leader would leave office, not a war market.

Nevada Courts Move Against Both Kalshi and Coinbase

Nevada’s legal actions against prediction market providers came ahead of Washington’s filing. An appeals court victory allowed Nevada to obtain a temporary restraining order against Kalshi.

Under the order, Kalshi was required to remove sports, entertainment, and election contracts from the state for at least two weeks.

A hearing is scheduled for Friday, April 3, where a state judge will decide on extending those restrictions. Trade publication Gambling Insider reported that Kalshi’s Nevada users could still access the platform after the order took effect. This raised questions about enforcement of the temporary restraining order.

Nevada also secured a preliminary injunction against Coinbase, which partners with Kalshi on prediction market offerings.

District Judge Kristin Luis noted that Coinbase did not dispute offering event-based contracts tied to sporting events and elections. The court gave Coinbase 60 days to make technological changes to comply with the order.

Diana maintained that Kalshi’s legal standing remains firm across jurisdictions. “As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction,” she said. “We are confident in our legal arguments,” she added.

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