Regulatory pressure on digital assets intensified in the United States this week as Kalshi restricted Washington state customers and crypto advocacy groups filed a fresh lawsuit against Illinois’ first-in-the-nation digital asset transaction tax.
Kalshi has blocked customers in Washington while asking a King County judge to reconsider an amended preliminary injunction restricting its prediction markets. The order required Kalshi to install IP address and residency-based controls by August 19, with a broader GeoComply system using multiple location sources due by September 2. If Kalshi fails to meet the second deadline, it could face a $120,000 daily penalty unless it submits a sworn explanation for any delay. The company told the court it had already blocked Washington customers.
The injunction covers event contracts linked to sports, elections, politics, entertainment, culture, technology and science, along with certain “mentions” markets. Washington Attorney General Nick Brown argues those products amount to unlicensed gambling. Kalshi contends the federal Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over contracts listed by registered exchanges.
In its reconsideration request, Kalshi argues Washington gave more favorable treatment to competing exchange North American Derivatives Exchange, operating as OG. Under an August 18 agreement, Washington officials will not pursue civil or criminal enforcement involving OG’s federally traded event contracts until related appeals are resolved. Kalshi said: “The very event contracts that the state deemed intolerable from Kalshi are now freely available” through a competitor. Judge John McHale is scheduled to consider Kalshi’s request on September 2 without oral argument, while existing restrictions remain active.
Kalshi’s Washington dispute is part of a broader state-level fight. Michigan and Nevada also restrict Kalshi access, while a federal judge blocked Minnesota’s prediction-market prohibition after finding registered exchanges were likely to succeed on part of their preemption argument. New York, Connecticut, Massachusetts, Ohio, Maryland, Utah and Arizona are also involved in pending disputes concerning prediction-market authority.
Meanwhile, CFTC Chairman Michael Selig said on August 20 that the agency would continue defending its claimed exclusive jurisdiction over federally regulated event contracts. He also said the commission would soon propose amendments to Parts 38 and 40 of its regulations, expected to address consumer protection, product governance, market design, listing standards and incentive programs.
Separately, the Crypto Council for Innovation and the Blockchain Association filed a complaint on Friday, August 21, in Sangamon County Court challenging Illinois’ new 0.2% tax on digital asset transactions. The filing adds to a separate lawsuit brought last month by The Digital Chamber. Illinois introduced the levy as part of its state budget legislation, becoming the first U.S. state to impose such a tax. It applies to companies based in Illinois or serving customers in the state that report gross revenue of at least $100,000, and is scheduled to take effect in 2027.
The plaintiffs argue the tax violates the U.S. Constitution, the Illinois Constitution, and the federal Internet Tax Freedom Act, which bars discriminatory taxes on electronic commerce. CCI CEO Ji Kim said the levy imposes a uniquely punitive burden on digital assets based solely on the underlying technology rather than the nature of the transaction, and that taxing only digital asset activity while exempting traditional financial transactions amounts to picking winners and losers through the tax system. The case remains in its early stages, and no court has yet ruled.
