CFTC Tells Kalshi to Defy Washington State Court’s Ban on Event Contracts

A Washington state court has ordered Kalshi to stop offering most of its prediction market contracts within the state, and the U.S. Commodity Futures Trading Commission has responded by directing the exchange to keep operating anyway, filing an emergency order arguing that federal law overrides the state ruling.

The dispute pits a state court’s cease order against the CFTC’s claim of exclusive federal jurisdiction over event contracts traded on Kalshi’s platform, setting up a direct conflict between state and federal regulators over who gets to police the fast-growing prediction market sector.

What the Washington ruling actually blocks

The Washington court’s order does not shut Kalshi down entirely. It carves out an exception allowing the company to continue listing markets tied to commodities, climate, economics and finance within the state, while ordering a halt to most other categories of event contracts it offers.

That narrower scope suggests the state’s objection centers on contracts that resemble sports betting or other wagering-style products rather than Kalshi’s finance- and economics-linked markets, which more closely mirror instruments the CFTC has historically regulated as derivatives.

CFTC’s counter-move

In response, the CFTC filed an emergency order directing Kalshi to disregard the state court’s instructions and continue operating under the federal rules it is registered under as a designated contract market. The regulator’s position rests on the argument that Kalshi’s federally registered exchange status preempts state-level restrictions on the same products.

Kalshi has faced a wave of similar state-level challenges over the past year, with regulators in multiple jurisdictions arguing that its sports-linked and other event contracts function as unlicensed gambling products rather than legitimate derivatives. The company has consistently pushed back by citing its CFTC oversight and asserting federal preemption in court filings across several states.

Why the outcome matters for prediction markets

The Washington case is now a live test of whether a federally registered exchange can override a state court’s cease order simply by invoking its CFTC registration. If the CFTC’s emergency filing holds, it would reinforce Kalshi’s broader legal strategy of leaning on federal preemption to keep operating nationwide even as individual states attempt to restrict specific contract categories.

For traders and builders in the prediction market space, the standoff underscores that the regulatory perimeter around event contracts remains unsettled. A patchwork of conflicting state and federal rulings could determine which markets — sports, elections, economic indicators or otherwise — remain accessible to U.S. users on platforms like Kalshi, and how quickly that access can change state by state.

Read more: Kalshi Streams Crypto Perps Order Book Live via DoubleZero as Segment Hits 20.3% of Volume

Sources

• coingape.com
• theblock.co