Kalshi Approved For Margin Trading As Washington State Sues It For Illegal Gambling

Kalshi was approved for margin trading on the same day Washington’s attorney general sued it for running an illegal gambling operation. The prediction market platform secured a futures commission merchant license through an affiliate called Kinetic Markets LLC. The license would let institutional users open positions without posting the full amount of capital, a feature hedge funds have been waiting for. Kalshi CEO Tarek Mansour said a margin product would be coming “soon.” He noted capital efficiency is the main barrier keeping institutions off the platform. Hours later, Washington Attorney General Nick Brown filed a lawsuit alleging Kalshi violates the state’s Gambling Act and Consumer Protection Act by allowing residents bet on sports, elections, and events, including Iran war outcomes and measles case totals. Washington Joins The Legal Pile-On Washington is at least the 20th jurisdiction to take legal action against Kalshi. Arizona filed criminal charges earlier this month. Massachusetts secured a preliminary injunction in January. Courts in Maryland and Ohio have sided with state regulators, while Nevada and New Jersey initially ruled in Kalshi’s favor on federal preemption grounds. The lawsuit specifically flags a Kalshi ad featuring a text conversation about betting on the NFL from Washington state. The AG’s office also flagged that Kalshi reportedly attempted to recruit a 15-year-old influencer and has targeted college students between 18 and 21 as a core growth demographic. Wall Street Is Moving In Anyway The margin approval signals Kalshi is building institutional-grade infrastructure, even as political and legal pressure grows. Brokers are already working to open hedge fund access to event contracts. CME Group (NASDAQ:CME) hit 100 million event contracts traded in eight weeks earlier this year. Nasdaq (NASDAQ:NDAQ) and Cboe Global Markets (BATS:CBOE) have both filed to list competing binary options products. Flutter Entertainment (NYSE:FLUT) and DraftKings Inc (NASDAQ:DKNG) are watching the institutional migration closely. Prediction markets have already eaten into sports betting market share, and margin trading may accelerate the shift. Robinhood Markets (NASDAQ:HOOD) CEO Vlad Tenev has called prediction markets the fastest-growing business in company history. The Ninth Circuit is expected to rule on Kalshi’s federal preemption argument by mid-2026. That decision will likely determine whether the platform’s 50-state model survives. Image: Shutterstock