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.
Connecticut Lawsuit Seeks to Stop Kalshi Sports Contracts
The Connecticut Attorney General's Office said 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.
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. This lawsuit adds to the broader regulatory scrutiny of prediction markets, following the Kalshi $1.12 billion funding round and the CFTC's enforcement against a Polymarket bettor.
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, 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. 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 that the Commodity Exchange Act was likely to preempt New York's authority over sports event contracts.
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. CFTC Chair Michael Selig said the regulator would defend what it considers its exclusive authority over those markets.
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. The outcome could reshape how prediction markets operate across the United States.
