Crypto.com Sues Washington In Response to Kalshi Injunction

• Crypto.com’s prediction market platform OG has sued Washington Attorney General Nicholas Brown in response to a recent injunction against Kalshi
• OG, also known as North American Derivatives Exchange, filed the lawsuit for declaratory and injunctive relief
• OG filed the lawsuit in U.S. District Court for the Western District of Washington at Seattle

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Crypto.com’s prediction market platform Northern American Derivatives Exchange, operating as OG, this week filed a lawsuit in U.S. District Court for the Western District of Washington at Seattle, seeking an injunction against Attorney General Nicholas W. Brown to bar him from taking action against their prediction market services.

According to the lawsuit, the threat of enforcement of Washington law poses “a direct and imminent threat to OG’s business and its users and disrupts the comprehensive federal framework that places OG exclusively under the Commodity Future Trading Commission’s (CFTC) supervision.”

OG filed the lawsuit just two days after a Washington judge granted the state a preliminary injunction against Kalshi, which will eventually bar the prediction market operator from temporarily offering sports event contracts.

Regulated by CFTC

As is the case for most of these types of lawsuits, OG claims the state has no power to regulate its prediction markets, as Congress has provided exclusive regulatory authority to the CFTC under the Commodity Exchange Act (CEA).

“Thus, there is a concrete and imminent threat that Defendants will take the same actions against OG as they did against Kalshi. Because the CFTC has exclusive jurisdiction over federally registered markets and intermediaries, Defendants’ efforts to prohibit the trading of event contracts listed on federally regulated markets are preempted by federal law. OG is entitled to a judicial declaration that its activities are not subject to Defendants’ oversight, regulation, or jurisdiction, as well as an injunction barring Defendants from any future enforcement efforts,” counsel for OG wrote in the lawsuit.

Brown’s filed lawsuit against Kalshi, and the judge’s decision to grant the preliminary injunction against the prediction market operator, forced OG’s hand to take legal action to deter the attorney general from attempting to enforce its state gambling laws against Crypto.com’s federally regulated markets.

Potential legal action against OG from the state will “imminently and irreparably harm” the operator and interfere with its ability to conduct federally regulated activities, according to counsel.

“Ceasing to permit Washington residents to purchase or sell event contracts on its DCM in order to avoid civil penalties or sanctions pursued by Defendants would deprive OG of the revenue that it would otherwise derive from trading of event contracts by Washington residents. These ongoing economic losses would be unrecoverable because sovereign immunity bars recovery for monetary damages,” counsel wrote.

Kalshi Sports Event Contracts Will Temporarily Be Barred

Kalshi will soon face a preliminary injunction and be temporarily barred from offering its sports event contracts in the state.

State of Washington King County Superior Court Judge John McHale declared the state has shown a “likelihood of success on the merits” of its claims that portions of Kalshi’s event contract offerings, including sports event contracts, violates aspects of the Washington Gambling Act.

Details of the preliminary injunction will be released on Wednesday, Aug. 5.

According to the Washington State Office of the Attorney General, 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.”

Judge McHale noted in his ruling that the state has shown a likelihood that Kalshi violates multiple provisions of the Washington Gambling Act. This includes operating, managing, and profiting from illegal gambling activities in the state, engaging and continuing to engage in professional gambling in violation of the act, engaging in online gambling activities in violation of the law, and offering gambling on its platform in violation of the act.

The court will issue the final preliminary injunction order on Aug. 5 after considering specific terms from both Kalshi and the Washington Attorney General’s Office. Kalshi will temporarily be blocked from offering its sports event contracts in the state.