Washington escalates the legal fight over prediction markets, suing Kalshi for allegedly flouting state gambling laws — the latest in a string of actions by U.S. states targeting platforms that let users trade contracts tied to real-world events. What Washington says - Washington’s attorney general filed a complaint accusing Kalshi of operating like an online sportsbook, offering event-based contracts with posted odds that determine payouts. The state argued Kalshi’s website and app let consumers “bet on anything” while calling the product a “prediction market” to avoid state gambling rules, including an explicit ban on online gambling. - The suit alleges Kalshi’s marketing even described its service as “legal betting” and says the platform’s offerings meet state definitions of “gambling,” “professional gambling,” and “bookmaking.” Washington also claims some products encouraged gambling addiction and were marketed to college students. - The AG’s press release referenced contracts tied to the Iran War; the filing itself named a contract about when Iran’s former Supreme Leader would be out of office. Kalshi pushes back - Kalshi moved to transfer the case to federal court, saying it is already litigating similar issues in other federal courts and that Washington sued without prior warning or dialogue. - Elisabeth Diana, Kalshi’s head of communications, told CoinDesk the company does not offer “war markets” and argued Kalshi is “a regulated, nationwide exchange for real-world events” that falls under federal jurisdiction rather than state gambling law. “We are confident in our legal arguments,” she said. A broader state-federal showdown - The Washington suit is part of a growing state backlash. States maintain these products are gambling in disguise and should be governed by state gambling laws. Prediction market firms — and some federal officials, including Commodity Futures Trading Commission Chair Mike Selig — argue the products are derivatives that belong under federal regulation. - Legal experts expect the dispute to eventually reach the U.S. Supreme Court, where questions of federal exclusivity and the line between regulated derivatives and state-defined gambling could be resolved. Recent related rulings - Last week Nevada won an appeals court green light to seek a temporary restraining order requiring Kalshi to pull sports, entertainment and election contracts from the state for at least two weeks. A hearing on whether to extend that restriction was set for Friday, April 3. - Despite Nevada’s TRO, trade press reported that some Nevada users could still access Kalshi after the order went into effect. - Nevada also obtained a preliminary injunction requiring Coinbase to keep its prediction market offerings paused in the state. Judge Kristin Luis noted Coinbase did not dispute it offered “event-based contracts” tied to sports and elections that meet Nevada’s definition of “sports pools.” The order — which also references Coinbase’s partnership with Kalshi — bars sports, election and entertainment contracts in Nevada until the broader case is resolved and gives Coinbase 60 days to make technological changes to comply. Where this leaves the industry - The litigation raises stakes for crypto and fintech platforms offering event-based contracts. If states prevail, companies could face a patchwork of state restrictions and enforcement actions. If federal jurisdiction is affirmed, platforms may be able to operate under a unified federal regulatory framework. - Kalshi’s lawyers and other industry proponents will likely press the federal-regulation argument; states will continue to press consumer-protection and anti-gambling claims. Updates: Kalshi’s comments were added after the initial filing, and the story was updated with additional context on March 28. Read more AI-generated news on: undefined/news

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