Kalshi Geofences Washington Under Threat of $120,000 a Day

A King County judge has ordered sports, elections, politics, entertainment and "mentions" markets out of the state, and left commodities, climate, economics and finance in place. The line the court drew is by subject, not by structure, and that is the part with consequences beyond Washington.

• King County Superior Court Judge John F. McHale issued a final order requiring Kalshi to stop offering sports, elections, politics, entertainment, culture, tech and science, and "mentions" event contracts in Washington
• Kalshi had to have an IP address and residency based geofence running by 19 August, and must have a multi-source geofencing solution in place by 2 September or face fines of $120,000 for every day it does not
• The company began notifying Washington users last week that certain markets were blocked, after the Washington Court of Appeals refused its request to stay the injunction that the same court had granted the state in July
• McHale found the state had shown a likelihood of success on the merits of its claim that parts of Kalshi's offering breach the Washington Gambling Act, following a lawsuit filed by Attorney General Nick Brown in March
• Markets on commodities, climate, economics and finance are untouched and continue to trade in the state

A Court That Sorted the Order Book Rather Than Rejecting It

Judge John F. McHale's final order in King County Superior Court does something the rest of Kalshi's litigation has largely avoided. It does not decide whether an event contract is a security, a swap or a wager as a class. It goes through the categories Kalshi lists and divides them.

Out go sports, elections, politics, entertainment, culture, tech and science, and the "mentions" markets that ask what a named person will say. In stay commodities, climate, economics and finance. Kalshi remains open for business in Washington on roughly the half of its book that looks like a derivatives exchange, and is shut on the half that looks like a sportsbook and a novelty book.

The compliance schedule is specific. An IP address and residency based geofence had to be live by 19 August. A multi-source geofencing solution, meaning identification that does not rest on a single signal a determined user can defeat, is required by 2 September. Miss that date and the state may fine the company $120,000 for each day it remains out of compliance.

McHale ruled that Washington had shown a likelihood of success on the merits of its case that parts of the offering violate the Washington Gambling Act. Attorney General Nick Brown filed the suit in March, arguing the company was operating in direct breach of the state's prohibition on online gambling. Kalshi asked the Washington Court of Appeals to stay the injunction and was refused.

The company has complied. It started telling Washington customers last week that specific markets were no longer available to them, which is a different posture from the one it has taken in most of the twenty or so actions it faces. It has fought New York, where the state is seeking $36 billion, and it has had the federal regulator intervene on its behalf. In Washington it has switched the markets off.

The Order Splits the Book by Subject, Not by Structure

Every argument Kalshi has won federally rests on structure: a sports event contract is a swap under the Commodity Exchange Act, the CFTC has exclusive jurisdiction over swaps, and so state gambling law is preempted. Structure is a category argument, and it is all or nothing. McHale sidestepped it by looking at subject matter instead, and the result is a book carved in half along exactly the line a reasonable person would draw between hedging and betting. That is much harder to appeal on preemption grounds, because the court has not held that event contracts are gambling. It has held that contracts on who wins a football game are, while contracts on the price of wheat are not. Other state courts now have a template that does not require them to take on the CFTC directly.

A Daily Fine Is the Remedy That Finally Bites

Kalshi has absorbed adverse rulings across several states, in Michigan, Nevada and Connecticut among them, and kept trading while it appealed. An injunction it can appeal is a cost of doing business. A running penalty of $120,000 a day, tied to a specific technical standard with a specific date, converts delay from a tactic into a bill. Note also what the standard demands: multi-source geofencing, not the IP-based check that Nevada previously found inadequate. Washington has learned from the compliance disputes in other states and written the fix into the order rather than litigating it afterwards.

Complying in One State Weakens the Argument in the Others

Kalshi's federal case has always carried an implicit claim that it cannot comply with a patchwork, because state-by-state exclusion would break a national market that the Commodity Exchange Act was designed to make uniform. Switching off seven categories in Washington while continuing to trade four is a demonstration that the patchwork is operable. It is precise, it is quick, and the company did it inside a fortnight. That is useful for the states and awkward for Kalshi, and it will be quoted back at it. The counter is that compliance under threat of a six-figure daily fine proves capability rather than lawfulness, which is true, and which is also exactly the sort of distinction that loses rooms.

Kalshi has spent a year arguing that only the CFTC may draw this line. A state judge has now drawn it anyway, category by category, and the company has redrawn its own map to match. The precedent is not the ruling. It is the compliance.