Connecticut has sued Kalshi and asked a court to block the prediction market platform from offering sports event contracts that state officials classify as unlicensed sports wagering.
Summary
- Connecticut has sued Kalshi seeking an injunction against its sports event contracts.
- State officials argue the contracts amount to unlicensed sports wagering.
- Kalshi maintains its markets fall under exclusive federal CFTC oversight.
- The company has appealed an earlier Connecticut ruling to the Second Circuit.
The Connecticut Attorney General’s Office said Wednesday that Attorney General William Tong, Department of Consumer Protection Commissioner Bryan T. Cafferelli, and Governor Ned Lamont are seeking an injunction requiring Kalshi to stop offering the contracts in the state.
Connecticut officials have maintained that contracts tied to the outcome of sporting events fall under state gambling laws even though Kalshi operates as a federally regulated derivatives exchange. The lawsuit extends a dispute that began in December 2025 and is now being litigated alongside separate federal proceedings involving the Commodity Futures Trading Commission.
“Sports event contracts are no different than sports betting and are not magically shielded by federal law from Connecticut’s commonsense consumer protection laws,” Tong said.
State officials said Kalshi has continued offering sports markets without holding the licenses required of Connecticut sportsbook operators. The state legalized sports wagering in 2021 through a system that subjects licensed operators to consumer protection, age verification and other regulatory requirements.
Lamont said prediction market operators should not be allowed to operate outside the regulatory structure established for licensed sportsbooks.
“When we legalized sports wagering in 2021, the goal was to create a safe, responsibly regulated market for Connecticut consumers, not to open a free-for-all on sports betting,” Lamont said.
Connecticut lawsuit seeks to stop Kalshi sports contracts
The dispute dates back to December 2025, when Connecticut’s Department of Consumer Protection ordered Kalshi, Robinhood and Crypto.com to stop promoting and offering sports event contracts to residents.
As crypto.news previously reported, state regulators classified the products as unlicensed online gambling and said the companies lacked licenses to offer sports wagering in Connecticut.
Regulators also raised concerns about contracts being available to people under the state’s legal sports betting age of 21, protections against insider wagering, and technical standards imposed on licensed operators. Connecticut required the three companies to halt the products while allowing customers to withdraw their funds.
Kalshi challenged the enforcement action in federal court the following day, arguing that Connecticut was attempting to regulate contracts that fall under federal commodities law.
The company has based its case on its status as a designated contract market regulated by the CFTC. Kalshi received that designation in 2020 and maintains that contracts traded through its exchange are derivatives subject to federal oversight under the Commodity Exchange Act.
Under Kalshi’s argument, the CFTC has exclusive authority over contracts listed on federally registered designated contract markets, preventing individual states from applying their gambling laws to the products.
Connecticut has disputed that interpretation and maintains that federal derivatives regulation does not prevent it from enforcing state laws governing sports wagering.
Kalshi has failed to stop Connecticut enforcement
The legal fight moved against Kalshi earlier this month when U.S. District Judge Vernon Oliver denied the company’s request for a preliminary injunction that would have prevented Connecticut officials from enforcing their gambling laws while the federal case continued.
Kalshi has since appealed the ruling to the U.S. Court of Appeals for the Second Circuit.
The company’s head of litigation, Jovy Dedaj, criticized Connecticut’s latest lawsuit in a post on X, calling it “the latest in a line of arbitrary and inconsistent enforcement.”
Dedaj argued that other prediction market operators remained active in Connecticut while the state pursued Kalshi.
“This unequal treatment is exactly why federal oversight is necessary,” he said.
Kalshi has advanced the same federal preemption argument in several states where regulators have classified sports event contracts as gambling products.
A New York federal court rejected one such attempt in July when U.S. District Judge Analisa Torres denied Kalshi an injunction against enforcement of state gambling laws.
Torres found that Kalshi had not shown at the preliminary stage that the Commodity Exchange Act was likely to preempt New York’s authority over sports event contracts. The ruling allowed the state’s enforcement case to continue while Kalshi pursued its challenge.
Later that month, Kalshi also lost its request for emergency protection while the New York ruling was under appeal. The court denied the company’s request for an injunction pending appeal without resolving the underlying litigation.
CFTC has challenged state prediction market enforcement
Kalshi is not fighting the state enforcement campaign alone, with the CFTC taking its own legal action against states that have attempted to regulate federally registered prediction markets.
In April, the CFTC and Department of Justice sued Connecticut, Illinois and Arizona, arguing that state officials were interfering with the federal government’s authority over designated contract markets.
The federal government argued that prediction market contracts listed by CFTC-regulated exchanges fall under the Commodity Exchange Act and cannot be independently prohibited by state gaming authorities simply because the underlying events involve sports.
CFTC Chair Michael Selig said at the time that the regulator would defend what it considers its exclusive authority over those markets.
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” Selig said.
Connecticut is opposing the federal lawsuit while continuing its own enforcement action against Kalshi, leaving the same jurisdictional question before courts through separate cases.
The dispute centers on whether contracts based on sports outcomes remain federally regulated derivatives when traded on a designated contract market or can also fall within state definitions of sports wagering.
Courts have also restricted Kalshi in other states
State regulators have secured several early court victories as similar disputes have moved through courts around the country.
In Washington, a state judge blocked Kalshi sports markets in July after granting the state’s request for a preliminary injunction.
King County Superior Court Judge John McHale found that Washington was likely to succeed on claims that Kalshi’s activities violated state gambling laws. Kalshi had again argued that federal commodities law prevented the state from regulating its event contracts.
The litigation has formed part of a growing collection of state cases involving Kalshi and Polymarket, with more than a dozen states involved in enforcement actions, cease-and-desist orders or related court fights over prediction markets.
State officials have generally argued that sports event contracts function as sports bets because customers put money on sporting outcomes. Kalshi maintains that the legal structure of the products is different because users trade standardized contracts through an exchange regulated under federal commodities law.
Local governments have begun pursuing similar claims. Earlier this month, Baltimore sued Kalshi and Polymarket, alleging that sports event contracts offered through their platforms amount to illegal gambling.
Baltimore’s Kalshi action also named Coinbase, Robinhood and Webull, which have offered customers access to prediction market products through partnerships or distribution arrangements.
Connecticut’s case will proceed while Kalshi’s appeal of the earlier federal ruling remains before the Second Circuit and the CFTC continues its separate lawsuit challenging the state’s authority to regulate federally registered prediction markets.
