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Washington State's lawsuit against the prediction market Kalshi could enter uncharted territory.
Attorney General Nick Brown filed the lawsuit Friday claiming Kalshi violates state laws.
The lawsuit argues Kalshi violates the Washington state Gambling Act and Consumer Protection Act, and seeks to halt these unlawful activities, recover money lost by Washingtonians, and assess civil penalties.
“Kalshi wants people betting on almost everything possible in life—the outcome of elections, Supreme Court cases, even wars. For Kalshi, every event, every tragedy is nothing more than a potential way for Americans to risk their fortunes and for Kalshi to get rich,” said Brown. “As they advance this bleak vision of the future, they line their pockets and pat themselves on the back for sneaking around Washington’s gambling laws. No more.”
And Washington is not just any state when it comes to online gambling legalities.
It is the only state that makes placing a bet a Class C felony. Granted, nobody has ever been charged under this law.
Washington statute RCW 9.46.240 states that: "Anyone who “knowingly transmits or receives gambling information… over the internet” is committing a Class C felony."
While countless numbers of people have placed bets online since this law went into effect in 2006 to address the concerns over offshore gambling, those types of sites encompass a certain degree of anonymity. For a number of years following passage of this law, several offshore gambling companies stopped accepting new registrations from the state. That's how serious betting sites took this measure, fearing exposure of their customers.
And you know they weren't playing around as 2006 was the year the Seattle Seahawks played in the Super Bowl. Offshore sportsbooks were willing to forgo the high demand of Washingtonians wanting to place bets.
Prediction markets tend to be more transparent. Albeit, customer names and account information are not exactly published over the internet.
While highly unlikely, authorities in the state could conceivably use prediction market customers to set an example against sites they deem to be unauthorized to operate in Washington.
Kalshi, however, insists it is not a gambling site. Instead, the prediction market refers to customer activity as "trading". More specifically, CEO Tarek Mansour describes users as “trading event contracts”, not placing wagers.
Furthermore, Kalshi is legal and licensed by the Commodity Futures Trading Commission (CFTC).
These days, Washington statute RCW 9.46.240 is viewed much in the same light as a one-time ban on margarine manufacturing in Wisconsin.
In the late 1800s, Wisconsin banned margarine outright to protect the dairy industry. At times, selling it could lead to fines or even a prison sentence. The full bans were repealed in 1967.
With the proliferation of regulation sports betting in the United States - and even Washington State allowing in-person sports gambling at tribal casinos - the odds of state authorities testing statute RCW 9.46.240 are right up there with someone being criminally prosecuted for driving blindfolded in the state of Alabama. Yes, this is actually still against the law.
In a press release issued by the Washington AG, that office does not distinguish Kalshi from other forms of gambling.
"The definition of gambling under Washington law is 'staking or risking something of value upon the outcome of a contest of chance or a future contingent event,' and Kalshi’s activities fall squarely within that definition. Each Kalshi bet risks money, relies in part on chance, and promises a payout to winners."
- Chris Costigan, Gambling911.com Publisher
