A federal judge has stopped Connecticut regulators from moving forward with an enforcement action targeting prediction market operator Kalshi. The pause offers the company a brief window of protection as its legal fights in the U.S. intensify.
Key Takeaways
- A federal court temporarily blocked Connecticut from enforcing its cease-and-desist order against Kalshi while a jurisdictional dispute with federal regulators moves forward.
- Kalshi argues that only the Commodity Futures Trading Commission has authority over its event contracts, challenging Connecticut's claim of unlicensed gambling activity.
- The court set deadlines of early 2026 and scheduled a February hearing that could shape how states regulate prediction market platforms.
Connecticut's Department of Consumer Protection (DCP) sent notices to Kalshi, Robinhood, and Crypto.com earlier in December, accusing them of allowing state residents to participate in what the agency described as unlicensed online gambling. Regulators argued offering sports-related contracts through these platforms effectively amounts to sports betting, which requires state authorization.
Kalshi fired back the next day by taking the dispute to federal court. The company insists the markets it lists fall entirely under the authority of the Commodity Futures Trading Commission (CFTC), not state gambling regulators. According to Kalshi, its contracts are treated as federally regulated derivatives, so the state has no independent power to police them.
The key question now is whether Connecticut can enforce its gambling rules in this context or whether federal commodities law will override those efforts. Until that is resolved, U.S. District Judge Vernon Oliver has ordered the DCP to halt enforcement of its cease-and-desist directive.
The judge instructed the state to submit its response by Jan. 9, with Kalshi's reply due Jan. 30. A hearing scheduled for Feb. 12 is expected to provide the first major indication of how the court will view the competing claims of federal preemption versus state authority.
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Massachusetts pushes own case against sports-related markets
Connecticut isn't the only state pressing the issue. Massachusetts launched a parallel legal challenge, asking a state court to block Kalshi from letting local residents trade contracts tied to the outcomes of sporting events. It is the first instance of a state seeking a court order specifically targeting Kalshi's sports-based products.
The Massachusetts attorney general's request for a preliminary injunction comes as more states scrutinize the company's business model. At least nine jurisdictions have already issued cease-and-desist letters asserting that Kalshi is effectively running a sportsbook without securing the licenses required under their laws.
In her complaint, Attorney General Andrea Joy Campbell argued Kalshi's platform amounts to sports wagering disguised as event-contract trading and that the company has circumvented the regulatory process applicable to licensed operators. The filing also pointed to age-related concerns: State-approved sportsbooks cannot accept bets from individuals under 21, whereas Kalshi allows participation beginning at 18.
Kalshi continues to argue state gambling rules do not apply because its exchange is overseen exclusively by the CFTC under the Commodity Exchange Act. That position recently suffered a blow when a federal judge in Nevada concluded the company must comply with that state's gaming regulations.
The court held that sports-contest outcomes do not qualify as "events" in the sense required for federal commodities law to preempt state oversight.
