Kalshi Chases $40 Billion Valuation as Washington, New York and Other States Deal Fresh Regulatory Setbacks

Prediction market operator Kalshi is chasing a $40 billion valuation from investors just as regulators across the country hand the company a fresh wave of legal defeats. The company is reportedly in advanced talks with Sequoia Capital and Wellington Management for a new funding round of at least $750 million, a figure that would nearly double the $22 billion valuation Kalshi secured only three months ago. The timing is striking: the bigger the number Kalshi chases from Wall Street, the harder state regulators are pushing back on its sports-related contracts.

On Thursday, a King County Superior Court judge in Washington issued a final order directing Kalshi to cease the majority of its operations in the state, covering markets tied to sports, elections, politics, entertainment, culture, technology, and science, along with any contracts referencing Washington. The court found Kalshi likely violated the state’s Gambling Act and its Consumer Protection Act, a decision Washington Attorney General Nick Brown called “the first step toward holding Kalshi accountable.”

A Widening Legal Fight Across State Lines

Washington is far from alone. The state joins Massachusetts, Michigan, Nevada, and New York in winning court orders that restrict Kalshi’s activities, part of a broader wave of litigation that has swept up more than a dozen states alleging the company runs an unlicensed sports betting operation under the guise of federally regulated event contracts. New York Attorney General Letitia James filed suit against Kalshi on July 31, arguing the platform offers sports prediction markets without a license from the New York State Gaming Commission and should be forced to surrender gains, pay restitution, and face penalties equal to three times any illicit profits.

New York City is also turning up the heat separately from the state’s case. City Council Speaker Julie Menin said the Council has spent months examining marketing practices across the prediction market industry, sending information requests to Kalshi, Polymarket, Coinbase, and Gemini Titan over concerns that promotional tactics may mislead younger consumers on contracts tied to sports, politics, and culture.

Kalshi Leans on Federal Cover

Kalshi’s defense rests almost entirely on its status as a Designated Contract Market regulated by the Commodity Futures Trading Commission, arguing that federal oversight of exchange-traded derivatives preempts state gambling law. The CFTC has backed that position aggressively, filing suit against states including Arizona, Connecticut, Illinois, New York, Rhode Island, and Wisconsin to block enforcement actions, and on August 11 the agency ordered Kalshi to keep operating nationwide after the company declared a market emergency tied to New York’s push, warning that a shutdown could expose Kalshi to more than $36 billion in damages.

Kentucky’s attorney general has alleged that as much as 89% of Kalshi’s trading activity relates to sports betting, with more than $23 billion in sports contract volume logged in 2025 alone. That concentration is exactly why state regulators view the company’s federal preemption argument as a workaround for laws that would otherwise govern traditional sportsbooks, and why the fight increasingly looks headed toward a definitive answer from a federal appeals court, or eventually the Supreme Court.

Investors Aren’t Blinking Yet

None of that legal pressure appears to be slowing Kalshi’s fundraising momentum. The prospective $40 billion valuation would value the company at roughly 20 times its estimated $2 billion in annualized revenue and would put Kalshi well ahead of rival Polymarket, which has recently sought funding at a $20 billion valuation. Sequoia, already a Kalshi investor with a board seat, and Wellington, a $1.3 trillion asset manager that would be making its first investment in the company, are said to be considering leading the round.

The gap between Kalshi’s soaring price tag and its mounting legal exposure is becoming the central question for anyone watching the prediction market space. Investors are effectively betting that federal derivatives law will ultimately shield Kalshi’s sports contracts from state gambling statutes nationwide — a bet that, for now, courts in Washington, New York, Massachusetts, Michigan, and Nevada have all declined to validate. For bettors sticking with licensed, regulated books rather than prediction markets, standard sportsbook promo codes remain a far more straightforward way to get started.