Kalshi suffers legal setback in Connecticut sports betting case
Kalshi has suffered another legal setback in the United States after U.S. District Judge Vernon D. Oliver denied the prediction market operator’s request for a preliminary injunction against Connecticut officials.
The ruling means Connecticut can pursue enforcement of its gambling laws against Kalshi, although it does not itself constitute an enforcement action. The dispute centres on whether Kalshi’s sports-event contracts fall under federal commodities law or can instead be regulated as sports wagering by the state.
The court rejected Kalshi’s argument that its sports-event contracts qualify as “swaps” under the Commodity Exchange Act (CEA). Oliver said the contracts depend on the outcome of sporting events or discrete in-game occurrences rather than on whether an underlying event occurs or to what extent it occurs. The judge also found that the contracts were not associated with a potential financial, economic, or commercial consequence as required by the CEA.
The Connecticut decision adds to growing legal pressure on Kalshi’s sports prediction markets
Even if the contracts were considered swaps, Oliver concluded that the CEA would not prevent Connecticut from applying its gambling laws. The court found that Congress had not intended federal commodities legislation to displace state regulation in this area and said Connecticut’s requirements could operate alongside federal law.
Oliver also rejected Kalshi’s argument that Connecticut’s rules conflicted with CFTC requirements concerning impartial market access. According to the ruling, those federal provisions do not require Kalshi to make its contracts available nationwide.
The judge cited Kalshi’s own description of its products as sports betting, including the company’s statement that it “offer(s) legal sports betting nationwide.” He also noted that sports wagering has historically been regulated by states and that the CFTC has not traditionally exercised authority over sports betting.
Connecticut’s case against Kalshi began after the state Department of Consumer Protection issued a cease-and-desist order in December, accusing Kalshi of offering unlicensed online gambling through sports-event contracts. The department also sent orders to Robinhood Derivatives and Crypto.com.
Kalshi subsequently sued Connecticut officials, seeking preliminary and permanent injunctions against state interference with its platform. In its lawsuit, the company argued that its prediction markets were subject to CFTC oversight and lawful under federal law.
The Connecticut ruling comes amid wider disputes between prediction-market operators and state regulators. Courts in several jurisdictions have issued decisions concerning Kalshi’s sports contracts, while regulators continue to challenge whether such products should be treated as federally regulated derivatives or as sports wagering subject to state licensing requirements. A Washington state judge, for example, granted a preliminary injunction against Kalshi in July, blocking its event contracts under state gambling law.
