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At the end of July, King County Judge John McHale issued a preliminary ruling, which has now become final. The ruling prohibits the Kalshi platform from offering contracts related to sports, elections, politics, entertainment, cultural events, technology, and science to Washington residents. However, instruments based on commodity price movements, climate, macroeconomics, and financial indices remain unaffected. This distinction seems deliberate: state authorities have drawn a clear line between classic hedging derivatives and products that are more akin to betting.

Washington Attorney General Nick Brown commented on the ruling on social media, calling it a logical outcome of the fight against illegal gambling. He emphasized that the court found sufficient grounds to uphold the claim under three sections of local gambling legislation. For Kalshi, this means not only legal losses but also the need for an urgent technical overhaul of its operations with Washington users.

According to the ruling, the company must implement geofencing in two stages. By August 19, it must launch a basic blocking system based on IP addresses and customer residency data. By September 2, this mechanism will be replaced with multi-layered protection from GeoComply, which provides more precise location determination and virtually eliminates circumvention of restrictions. These measures are aimed at preventing any state resident from purchasing prohibited contracts.

The crux of the dispute boils down to the issue of regulatory precedence. Kalshi argued that its activities are regulated only by the CFTC, as the contracts are derivatives. However, Judge McHale rejected this argument, finding that federal law does not preempt Washington's anti-gambling regulations. A state appeals court has already denied Kalshi's request to stay the ban, forcing the company to comply with the ruling immediately.

This dispute extends beyond a single lawsuit. Kalshi is challenging similar restrictions in other jurisdictions, appealing to federal regulations. However, the Washington court's decision sets a precedent that other states can follow. Significantly, the court upheld products linked to raw materials, climate, and finance, recognizing their economic nature as distinct from betting.

Further developments depend on the outcome of Kalshi's appeal and the rulings on similar cases in other states.