A Bellevue, Washington, resident who lost more than $308,000 wagering on sporting events through Kalshi has filed a Kalshi lawsuit seeking a payment of more than $580,000, arguing that his bets violated the state’s ban on online gambling. Scott Bright filed the case on September 24 in King County Superior Court, and Kalshi has since moved to dismiss it, Ars Technica reported.
Bright’s complaint says his “wagering occurred at a time when it was unlawful in Washington and when the Washington Attorney General had already sued KalshiEX LLC in this Court alleging precisely that.” While state attorneys general around the country are trying to shut down the prediction market for allegedly breaking state gambling laws, Bright’s case tests a narrower question: whether individual losing gamblers can recover their money from the company directly.
253 Debits and $14.4 Million in Cycled Trades
According to the complaint, Bright transferred $315,353.94 to Kalshi between June 17 and August 14, 2026, in 253 separate debits from his checking account. Kalshi allegedly collected $5,589.05 in funding fees on those transfers.
Bright placed numerous wagers on sporting events including professional baseball games and tennis matches, and he apparently rolled winnings into new positions. The filing alleges that “Kalshi’s platform cycled Plaintiff’s deposits through $14,396,457.30 in transactions and assessed and retained $84,062.71 in trading fees on them, equal to 26.7 percent of everything Plaintiff deposited.” When he was finished, Bright had a net loss of $308,781.62 and an account balance of $983.27.
The Kalshi Lawsuit Leans on a 1950 Court Ruling
“Washington has prohibited Internet gambling since 2006. Washington has also provided, since long before that, a statutory cause of action permitting any person who loses money at illegal gambling to recover it from the proprietor for whose benefit the game was conducted,” the Kalshi lawsuit says.
Although his stated net loss is $308,781.62, Bright is asking for $580,544.98, using an “event-by-event” calculation drawn from a 1950 ruling by the Washington Supreme Court. “Computed on the event-by-event basis required by Heitfeld, under which winnings in separate and distinct events may not be offset against losses, the sums Plaintiff lost total $580,544.98,” the complaint says. If the court rejects that figure, it asks instead for all the funds he transferred plus the $89,651.76 in funding and trading fees Kalshi collected — more than $405,000.
Bright also cites the US Court of Appeals for the Ninth Circuit, which ruled in August that Nevada can regulate Kalshi under gambling laws. That case involved Nevada, but the Ninth Circuit’s jurisdiction includes Washington. His filing quotes the ruling’s finding that “placing sports bets, even when called by another name, is still gambling.”
Kalshi Says He Traded Event Contracts, Not Bets
In an October 30 motion to dismiss, Kalshi argued that Bright did not lose money on gambling at all. “The contracts which Plaintiff mischaracterizes as gambling are event contracts offered on the Platform subject to the CEA [Commodity Exchange Act], in conformance with the rules and regulations of the CFTC [Commodity Futures Trading Commission], the federal agency which has statutory authority to oversee the CEA,” the company said.
Kalshi also framed the suit as an attempt by a trader to undo his own choices. “Plaintiff alleges that his activity on the platform was gambling and that he ‘lost,’” the company wrote. “He does not allege that anyone misled him about how the platform worked, what it charged, or the risk that any position might lose. Yet, he now sues KalshiEX and its parent, Kalshi Inc., to recover nearly double his own alleged net realized loss under Washington’s gambling loss-recovery statute, and a theory of unjust enrichment.”
The company says Bright’s “alleged losses went to counterparties rather than” to Kalshi, and that his “positions were matched with counterparties and resolved according to the outcomes of the underlying events.” It added: “The Complaint does not allege that KalshiEX or Kalshi Inc. was the counterparty to any of Plaintiff’s positions.” Kalshi wants the case moved to the US District Court for the Western District of Washington, saying it must be tried in federal court rather than state court.
Questions Over Kalshi’s Trading Affiliate
Kalshi calls itself “a neutral exchange platform” with no financial stake in the outcome of any event, and makes revenue by collecting fees on transactions. Its business model also includes a trading affiliate that places wagers on the platform. Kalshi’s rulebook says that affiliate “participates on the Platform and provides liquidity to the Platform by placing orders on either (or both) sides of a market at competitive price levels,” and the company says the affiliate has access only to the same public information as other traders.
Bright alleges the affiliate “took the opposite side of a substantial portion of Plaintiff’s positions,” meaning that “Kalshi and the enterprise under common ownership with it were not a neutral venue but the dealer or player winning within the meaning of [state law], in addition to being the proprietor for whose benefit the wagering was conducted.”
He concedes he cannot confirm that. “The identity of the participant on the opposite side of each of Plaintiff’s positions, and the profit each such participant realized, is information exclusively within Kalshi’s possession,” the filing says. In a separate episode, Kalshi banned former Congressman George Santos for life over insider trading.
Washington’s Own Case and the August Injunction
Even if the Kalshi lawsuit fails, gamblers who lost money on the platform could recover funds through state litigation. Washington’s case says the attorney general “is entitled to recover all money Washingtonians have lost through Defendant Kalshi’s illegal gambling operation” under the state’s Recovery of Money Lost at Gambling Act.
Kalshi tried to move that case to federal court, but it was returned to King County Superior Court in May. Washington won a preliminary injunction in August, when a King County judge ordered Kalshi to implement geofencing and to stop offering or accepting event contracts “related to sports, elections, politics, entertainment, culture, tech and science, or mentions” in the state. The injunction did not affect wagers in the commodities, climate, economics, and finance categories.
Bright moved his money to Kalshi before that order took effect. He says that on September 15 he tried to open the app and received a notice reading, “using this app in your current location is prohibited.”
A Stay Request Tied to the Supreme Court
Kalshi also filed a motion to stay the proceedings at least until the US Supreme Court decides whether to take up a separate case on whether state gambling laws apply to prediction markets. “The orderly course of justice favors a stay because Supreme Court review will settle or simplify every claim and ensure uniform treatment of like suits,” Kalshi told the federal district court, adding that Washington officials are “pursuing overlapping claims” and that “The State of Washington is pursuing the same theory, and seeks the same recovery for Mr. Bright, in a case pending before the Superior Court of Washington for King County.”
Kalshi has absorbed some notable losses in US appeals courts, which found that states can regulate the platform’s event contracts under gambling laws. Federal courts have not been unanimous, however, and New Jersey has asked the Supreme Court to settle whether states can regulate Kalshi under gambling laws.
