A Washington court has ordered Kalshi to stop offering most of its event contracts in the state, as prediction markets become one of crypto’s busiest trading arenas.
According to Pew Research data, the period between July 2024 and the first five months of 2026 saw cryptocurrency contracts contributing to approximately 20% of Polymarket’s trade volume and around 7% of Kalshi’s.
Data collected by Artemis indicate that the contribution of cryptocurrency-related contracts in prediction markets is still significant. For example, for the week ending August 9, 2026, crypto contracts amounted to about 20.3% of Kalshi’s huge $8.11 billion worth of trade, while Polymarket managed to achieve 10.2% of its volume of $1.78 billion due to transactions involving cryptocurrencies. Whenever a state intervenes in Kalshi’s offerings, it impacts the legal discussion around how far the prediction market and its connection to crypto can advance.
A gambling ruling, not a trading one
In a news release, the Washington Attorney General’s (AG’s) office said Judge John McHale of King County Superior Court established that Kalshi appeared to have violated Washington’s Gambling Act and Consumer Protection Act, as it conducted illegal gambling activities, as noted by the court. The judge provided Washington with a preliminary injunction on July 20, stating that the state was likely to win the case and rejecting Kalshi’s argument that federal commodities legislation overrode Washington’s gambling statutes.
On August 13, McHale issued an order instructing Kalshi to stop conducting any operations related to sports, elections, politics, entertainment, culture, technology, science, and “mentions,” through which the public could bet on whether public figures uttered certain words.
Kalshi has to implement an IP-address and residency geofence system by August 19, after which a multi-source system must kick in by September 2, restricting access to Washington users from various markets.
“Kalshi has gotten rich promoting wagers on sports, elections, natural disasters, events related to the Iran War, and more,” said AG Nick Brown, adding that Washington would continue enforcing the law and make sure that the company would be held “accountable for misleading consumers.” According to his office, the Kalshi ad showed a person texting that he “found a way to bet on the NFL even though we live in Washington,” which proved that Kalshi was aware of its circumvention of the law.
What Kalshi keeps, and how it got here
Some of Kalshi’s businesses remain unaffected by the ruling of the court. It has been reported by the AG that Kalshi is able to offer contracts related to commodities, climate, economics and finance in Washington. Regulators note that the categories that have been banned make up a large share of Kalshi’s income, which largely relied on sports betting.
The Washington decision followed just a few days after a court case in Utah ended unsuccessfully for the federal government. U.S. District Judge Robert J. Shelby ruled on August 4th in favor of the state of Utah and issued a summary judgment stating Utah’s laws against gambling are applicable to Kalshi’s sports contracts.
Why the crypto market is watching a state courtroom
Kalshi is a Designated Contract Market under the supervision of the Commodity Futures Trading Commission (CFTC) and claims that federal derivatives laws provide the CFTC with sole jurisdiction while state gambling laws do not apply in this case. However, state authorities hold a contrary opinion. Along with Washington, lawsuits against Kalshi have also come from Massachusetts, Michigan, Nevada, and New York, where regulations have been passed that challenge Kalshi. In turn, the CFTC has filed lawsuits against nine states to assert its federal authority over Kalshi.
On June 12, the CFTC filed a lawsuit against New Mexico, asserting that federal law gives it primary jurisdiction over event contracts and seeking to prevent New Mexico from enforcing its gambling regulations with respect to CFTC-approved contract markets. On July 14, it intervened in Michigan, stopping the change to a Kalshi regulation which would have voided past trades conducted by Michigan residents and instructing the company to honor any open trades.
The CFTC described the cancellation of already executed trades as unprecedented and threatening to undermine the integrity of the derivatives market. The conflict escalated on August 11, when the CFTC exercised emergency authority after Kalshi notified the commission of a market emergency arising from New York Attorney General Letitia James’ July 31 lawsuit. The CFTC ordered Kalshi to continue operating in accordance with the Commodity Exchange Act’s core principles. New York’s suit seeks to stop Kalshi from offering event contracts nationwide and seeks more than$36 billion in damages.
According to Token Terminal, Kalshi recorded $38.646 billion in notional trading volume in July 2026, while Galaxy Research figures cited by Cryptopolitan put prediction markets above $150 billion in cumulative lifetime volume. Macquarie Equity Research estimated in July 2026 that annual prediction-market trading volume could reach approximately $1.5 trillion by 2030.
Because these platforms increasingly rely on stablecoin settlement and crypto-native infrastructure, whether courts treat them as federally regulated derivatives or state-level gambling will help determine how far crypto’s trading rails can expand.
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