Kalshi has blocked Washington users and requested reconsideration as the regulatory battle intensifies over prediction market jurisdiction. According to crypto.news, the company implemented IP address and residency-based controls by August 19 and must have a broader GeoComply system operational by September 2. Kalshi faces a $120,000 daily penalty for failing to meet the second deadline unless it submits a sworn explanation for any delays. The amended preliminary injunction covers contracts linked to sports, elections, politics, entertainment, culture, technology and science, along with certain 'mentions' markets, with record-preservation requirements remaining in place. Judge John McHale is scheduled to consider Kalshi's reconsideration request on September 2 without oral argument. Washington Attorney General Nick Brown argues these products amount to unlicensed gambling, while Kalshi continues to argue that federal Commodity Exchange Act gives the CFTC exclusive authority over contracts listed by registered exchanges.
Kalshi's reconsideration request relies on an August 18 agreement between Washington officials and OG, operating as North American Derivatives Exchange. According to crypto.news, Kalshi argues that 'The very event contracts that the state deemed intolerable from Kalshi are now freely available' through a competitor, describing both exchanges as 'identically situated.' The court has not accepted this characterization, with Washington maintaining that procedural history or negotiated terms distinguish the two cases. Under the OG agreement, Washington will not pursue civil or criminal enforcement involving OG's federally traded event contracts until related appeals are resolved. Kalshi wants McHale to vacate parts of the injunction or provide a stay comparable to OG's arrangement, arguing that the agreement undermines Washington's earlier claim that continued trading creates immediate consumer harm.
Washington joins Michigan and Nevada among states currently restricting Kalshi, with courts in those jurisdictions ordering location controls while state authorities pursue claims involving unlicensed sports wagering. As reported by crypto.news, Kalshi has appealed or challenged those orders, with its central argument remaining that federally regulated event contracts are derivatives, meaning state gambling laws cannot control their listing or trading. New York, Connecticut, Massachusetts, Ohio, Maryland, Utah and Arizona are also involved in pending disputes concerning prediction-market authority. Courts have not adopted one national answer, with contrasting outcomes - a federal judge blocked Minnesota's prediction-market prohibition after finding registered exchanges were likely to succeed on part of their preemption argument. The outcomes may depend on contract type, statutory wording and the procedural stage of each case.
CFTC Chairman Michael Selig announced on August 20 that the agency would continue defending its claimed exclusive jurisdiction over federally regulated event contracts. According to crypto.news, Selig acknowledged concerns about retail protections and said the commission would soon propose amendments to Parts 38 and 40 of its regulations. The proposals are expected to address consumer protection, product governance, market design, listing standards and incentive programs. The CFTC has already proposed changes explaining how it could assess contracts involving gaming, war, terrorism, assassination or illegal activity. Selig said the amendments would arrive 'soon,' but the CFTC has not published their complete text or a formal release date. Proposed regulations must still pass through the federal rulemaking process and will not automatically reverse state court orders.
The regulatory fight escalated at the inaugural meeting of the CFTC Innovation Advisory Committee on Thursday, August 21, 2026, where CME Group Chairman Terry Duffy and Kalshi co-founder Luana Lopes Lara engaged in a highly public confrontation. According to CoinDesk, the exchange featured direct criticism of each other's platforms, with Duffy stating he is 'very concerned' about prediction markets and noting that certain event contracts are more susceptible to manipulation. Duffy specifically criticized some contracts offered by Kalshi and questioned whether such products have undergone the same level of scrutiny as those on established exchanges. The confrontation reflects a deeper regulatory collision between federal and state authorities over prediction market classification, with the CFTC claiming jurisdiction over event contracts as federally regulated derivatives while multiple states argue these contracts are gambling products subject to state gambling laws.
A U.S. survey published on August 12, 2026 by BadCredit.org revealed significant consumer protection issues in prediction markets. As reported by CoinDesk, the survey found that 79% of prediction market users lost money in the past year, with 51% using borrowed funds to place bets. These loss rates are worse than historical retail futures trading rates of 70-75% and comparable to retail forex trading loss rates of approximately 80%. The survey was notably absent from the CFTC roundtable discussion, with neither Duffy, Lara, nor commissioners raising consumer loss rates during the jurisdictional debate. For traders and investors, the dispute signals that the rules governing event contracts could shift depending on how regulators and courts resolve jurisdictional questions.
