Washington Man Who Lost $308,000 on Kalshi Sports Bets Sues for $580,000, Calling It Illegal Gambling

SEATTLE — A Washington state man who lost more than $308,000 betting on sports through the prediction market Kalshi is suing the company to recover his losses and more, arguing that its sports contracts amounted to illegal online gambling under state law.

Scott Bright, a resident of Bellevue, filed the lawsuit on Sept. 24 in King County Superior Court, according to Ars Technica, which first reported on the case. He is seeking more than $580,000, nearly double his net losses.

Kalshi has asked the court to dismiss the case, arguing that Bright was not gambling at all but trading federally regulated financial contracts.

The case is one of the first to test whether individual customers, not just state governments, can use gambling laws to force prediction markets to repay losses.

The claim

Bright's lawsuit centers on Washington's long-standing ban on internet gambling. The state has prohibited online gambling since 2006, the complaint says, and older state law allows anyone who loses money at illegal gambling to recover it from the operator that ran the game.

The complaint also argues that Bright placed his bets at a time when Washington's attorney general had already sued Kalshi, alleging the same thing.

According to the lawsuit, Bright transferred $315,353.94 to Kalshi between June 17 and Aug. 14, 2026, through 253 separate debits from his checking account. He bet on events including professional baseball games and tennis matches, and apparently put his winnings back into new bets.

The complaint says Kalshi's platform cycled his deposits through more than $14.3 million in transactions. It alleges the company kept $84,062.71 in trading fees, equal to 26.7% of everything he deposited, plus $5,589.05 in funding fees on his transfers.

After all the betting, Bright had a net loss of $308,781.62, leaving his account with a balance of $983.27, according to the filing.

Why he wants more than he lost

Bright is seeking $580,544.98, a figure that goes well beyond his net losses. His lawyers base the higher number on a 1950 Washington Supreme Court ruling, which they argue requires losses to be calculated event by event, without offsetting winnings from one game against losses from another.

If the court rejects that approach, the lawsuit asks for an alternative: the return of all the money Bright transferred to Kalshi plus the $89,651.76 in fees the company collected. That would total more than $405,000.

Kalshi's defense

Kalshi rejects the premise that Bright was gambling. In an Oct. 30 motion to dismiss, the company said Bright traded "event contracts" governed by the federal Commodity Exchange Act and overseen by the Commodity Futures Trading Commission, which it argues means only federal regulators can oversee them.

Kalshi also argued that Bright does not claim anyone misled him about how the platform worked, what it charged or the risk of losing. It said his losses went to other traders, not to Kalshi itself, because his positions were matched with counterparties and settled based on the outcomes of real events.

The company describes itself as "a neutral exchange platform" with no stake in any event's outcome, earning revenue from transaction fees.

Kalshi has also sought to move the case from state court to the U.S. District Court for the Western District of Washington.

The trading affiliate question

The lawsuit challenges Kalshi's claim of neutrality. Kalshi's own rulebook says a trading affiliate participates on the platform and provides liquidity by placing orders on either or both sides of a market. Kalshi says the affiliate has access only to the same public information as other traders.

Bright's complaint alleges that the affiliate took the opposite side of a substantial portion of his positions, which would make Kalshi more than a neutral venue under state law.

But Bright acknowledges he cannot confirm that. The complaint says the identity of the trader on the other side of each bet is information only Kalshi possesses.

Courts divided

The legal battle over prediction markets has been playing out across the country. The 9th U.S. Circuit Court of Appeals, whose jurisdiction includes Washington, ruled in August that Nevada can regulate Kalshi under gambling laws. Bright's lawsuit quoted the court's finding that "placing sports bets, even when called by another name, is still gambling."

Federal courts have not all agreed, however, and New Jersey has asked the U.S. Supreme Court to decide whether states can regulate Kalshi under their gambling laws.

Kalshi has asked the court to pause Bright's case at least until the Supreme Court decides whether to take up that question. The company argued that "Supreme Court review will settle or simplify every claim."

Washington's own lawsuit

Bright's case runs alongside a broader action by the state. Washington's attorney general has sued Kalshi, arguing the state is entitled to recover all money residents lost through what it calls Kalshi's illegal gambling operation.

In August, a King County judge issued a preliminary injunction ordering Kalshi to use geofencing and stop offering contracts in Washington related to sports, elections, politics, entertainment, culture, tech and science, or "mentions." Contracts on commodities, climate, economics and finance were not affected.

Kalshi had tried to move the state's case to federal court, but it was sent back to King County in May.

Bright's betting took place before the injunction took effect. His lawsuit says that when he tried to open the app on Sept. 15, he received a notice that "using this app in your current location is prohibited."

Kalshi noted in its filings that the state is pursuing overlapping claims and seeking the same recovery for Bright.

What's next

Courts must first decide where the case will be heard and whether it should be paused pending possible Supreme Court action. Even if Bright's individual claim fails, losing bettors in Washington could still recover money through the state's lawsuit.

Bright's attorney, Michael Daudt, did not respond to Ars Technica's request for comment on Kalshi's filings.