Washington asked a federal judge to send its civil enforcement case against Kalshi back to state court, escalating the state’s legal battle with the prediction market platform. The request came the same day the Third U.S. Circuit Court of Appeals handed Kalshi a major win against New Jersey.
In a motion to remand filed on April 6, the state argued that its case is based entirely on Washington law and that Kalshi’s federal preemption argument doesn’t justify removal to federal court.
The state called out what it considers to be a legal strategy Kalshi employs to buy time, writing in the motion that:
Kalshi understands its removal attempt is likely to fail. Yet Kalshi removed anyway because delay is profitable.
Washington’s latest filing adds yet another layer to the legal fight over event contracts that’s growing messier by the day.
A divided Third Circuit panel ruled 2-1 in Kalshi’s favor against New Jersey, finding that the company’s sports-related contracts fall under the Commodity Exchange Act and the CFTC’s exclusive jurisdiction.
The ruling strengthens Kalshi’s argument that disputes over event contracts belong in federal court, even as Washington tries to send its own case against the prediction market platform back to state court, framing the dispute as a straightforward gambling enforcement action.
Washington also argues that Kalshi has used similar legal tactics in other cases in which it has sought to remove gambling-law disputes to federal court.
In the filing, the state notes that federal courts in Nevada and Massachusetts have already rejected comparable removal arguments, while Kentucky and Ohio courts remanded private-party actions as well.
Washington Says Removal Bid is Tactic to Delay
Washington argued that Kalshi’s effort to remove the case to federal court is part of a legal playbook that the event contract exchange has used in a number of similar disputes across the country.
In the motion, the state said Kalshi has adopted a “two-pronged strategy” of “preemptively filing declaratory judgment actions in federal courts” and “removing state court actions on the basis of ever-evolving and increasingly strained removal arguments that have been soundly rejected.”
The state insists its complaint should remain in state court because it’s based entirely on Washington law and raises no federal claims.
It also argues that Kalshi is improperly using federal preemption as a basis for federal jurisdiction, even though preemption is generally treated as a defense rather than grounds for removal.
As the state put it in the motion:
The State’s Complaint, filed in state court, asserts violations of Washington law. It makes no federal claims, cites no federal law, and raises no federal issues.
The motion dismisses Kalshi’s preemption arguments as a “plain vanilla federal preemption defense, not a claim of complete preemption,” which Washington says doesn’t meet the threshold for removal.
The filing is even blunter when addressing Kalshi’s argument that federal definitions should control terms like “bets” and “wagers,” saying:
This is nonsense. If the absence of a statutory definition in a state law was sufficient to raise an issue of federal law conferring federal subject matter jurisdiction, cases would never be heard in state courts again.
The state is seeking attorneys’ fees and costs, arguing there was “no objectively reasonable basis” for removal, given the growing list of remand decisions cited in its brief.
Third Circuit Ruling Adds Pressure to Already-Crowded Fight
What makes the timing of Washington’s motion interesting is that it happened to land on the same day Kalshi scored its appellate victory in New Jersey.
In that case, the Third Circuit held that Kalshi’s event contracts are “swaps” under federal law, backing the company’s argument that states cannot regulate them as ordinary gambling products.
Reacting to the decision, Commodity Futures Trading Commission Chairman Michael Selig posted on X that the decision “reaffirms Congress’ intent for the @CFTC to have exclusive regulatory jurisdiction over trades on DCMs.”
While the Third Circuit ruling does not directly decide Washington’s remand fight, it could still influence how courts view the jurisdictional dispute. And it widens the divide over whether prediction markets fall under state gambling law or federal commodities oversight.
For the time being, Washington is trying to keep the next phase of the fight in state court. Whether it succeeds could shape the available remedies in the case and how aggressively other states pursue Kalshi under their own gambling laws.
