Meta description: Connecticut sued Kalshi to block sports event contracts after a federal judge rejected the exchange’s preemption bid.
Tags: Kalshi, Connecticut, William Tong, CFTC, Commodity Exchange Act, sports betting
Market platform: Kalshi
Category: Regulation
Connecticut sued Kalshi on Aug. 26, asking a state court to stop the exchange from offering sports event contracts that state officials describe as unlicensed sports wagering. The complaint came 16 days after U.S. District Judge Vernon D. Oliver denied Kalshi’s request for a preliminary injunction against Connecticut regulators in federal court.
What is Connecticut asking the court to do?
Attorney General William Tong, Department of Consumer Protection Commissioner Bryan T. Cafferelli and Gov. Ned Lamont said in an Aug. 26 announcement that Connecticut is seeking a court injunction to block Kalshi from offering sports event contracts in the state. Connecticut says those contracts are sports wagers offered without the license required under its gaming laws.
Tong framed the case as an enforcement action under Connecticut consumer-protection and gambling statutes. “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 in the attorney general’s announcement. Lamont said Connecticut’s 2021 legalization of sports wagering was designed to create “a safe, responsibly regulated market” rather than “a free-for-all on sports betting.”
The attorney general’s office said the contracts at issue include propositions tied to whether a team or player wins a game or series, a team’s season win total, league rankings, points scored in a match, point spreads, and player statistics such as points scored or the method by which a match is won. Connecticut’s position is that those products track sports betting closely enough to fall within the state’s gambling framework.
Why did Connecticut sue Kalshi now?
The state suit follows an enforcement sequence that put Kalshi on notice in Connecticut. According to the Aug. 26 attorney general announcement, the Department of Consumer Protection Gaming Division previously ordered Kalshi and two other sites to cease and desist advertising, offering, promoting or otherwise making available sports event contracts or other unlicensed online gambling to Connecticut residents.
Kalshi responded by suing Connecticut officials in federal court, arguing that its markets are federally regulated derivatives and that Connecticut’s gambling laws are preempted by the Commodity Exchange Act. Kalshi has been registered with the Commodity Futures Trading Commission as a designated contract market since 2020, a status that allows it to list certain event contracts under federal commodities regulation.
The dispute turns on a threshold legal question: whether Kalshi’s sports event contracts are swaps or other federally regulated derivatives that displace state gambling enforcement, or whether they are sports wagers that Connecticut may regulate under its own licensing system. The same question has shaped Kalshi’s fights with gaming regulators in other states.
Kalshi Head of Litigation Jovy Dedaj criticized Connecticut’s action in comments reported by The Block, calling the state’s approach “arbitrary and inconsistent enforcement” and pointing to other prediction-market activity in Connecticut. Connecticut’s contrary view, stated in the attorney general’s announcement, is that Kalshi’s sports contracts are gambling products marketed outside the safeguards that apply to licensed operators in the state.
What did Judge Vernon Oliver already decide?
On Aug. 10, Judge Vernon D. Oliver of the U.S. District Court for the District of Connecticut denied Kalshi’s motion for a preliminary injunction in KalshiEX LLC v. Cafferelli. The order did not finally decide the case, but it rejected Kalshi’s request to block Connecticut enforcement while the litigation proceeds.
Oliver found that Kalshi had not shown a likelihood of success on two central arguments: that its sports event contracts qualify as swaps under the Commodity Exchange Act, and that federal law preempts Connecticut gambling laws as applied to those contracts. In the related Coinbase Financial Markets case, Oliver attached the Kalshi opinion and reached the same result for Coinbase’s request to block state enforcement involving Kalshi-listed sports contracts.
The swap-definition ruling is the key legal point. Oliver wrote that Kalshi’s sports contracts do not depend on whether an underlying sporting event occurs, fails to occur or occurs to a particular extent. Instead, he reasoned, they depend on outcomes or discrete in-game occurrences within a sporting event. The court concluded that treating each possible game result or player statistic as its own statutory “event” would stretch the ordinary meaning of the Commodity Exchange Act’s language.
Oliver also found that Kalshi had not shown federal preemption even if the contracts were treated as swaps. The court said Connecticut’s gambling laws and the federal commodities regime could coexist, and it rejected the premise that CFTC oversight necessarily bars Connecticut from applying its gaming laws to sports-related contracts offered to residents.
How does the ruling affect Kalshi’s preemption argument?
The Aug. 10 order narrowed Kalshi’s immediate leverage in Connecticut because the court rejected both parts of its preliminary-injunction theory. If sports event contracts are not swaps within the Commodity Exchange Act’s definition, Kalshi’s argument for exclusive federal oversight has less force. If state gambling laws are not preempted even when federal commodities rules apply, Connecticut has a separate route to enforcement.
That does not end the litigation. A preliminary-injunction ruling asks whether the moving party has met the standard for temporary relief, not whether the case is finally resolved. Kalshi appealed Oliver’s ruling to the U.S. Court of Appeals for the Second Circuit, giving the appellate court a chance to address the same swap-definition and preemption questions.
The Second Circuit’s treatment of the appeal will matter beyond Connecticut because other state regulators have raised similar arguments against sports event contracts. A decision endorsing Connecticut’s view would strengthen state gaming agencies that say federally registered exchanges still need state approval to offer products that function like sports betting. A decision favoring Kalshi would give federally regulated prediction-market operators a stronger argument against state-by-state sports wagering controls.
Where does Connecticut fit among other state actions?
Connecticut is one piece of a broader state regulatory campaign against sports event contracts. Since early 2025, gaming regulators in several states, including Nevada, New Jersey, Maryland and Ohio, have challenged Kalshi’s sports markets through cease-and-desist letters or enforcement threats. Kalshi has responded in multiple jurisdictions by arguing that federal commodities law preempts state gaming regulation.
The results have not been uniform. Some courts have granted Kalshi temporary relief against state enforcement, while others have rejected its requests. Connecticut’s Aug. 10 federal ruling falls on the state-regulator side of that split because the court concluded that Kalshi had not shown likely success on either the swap argument or the preemption argument.
The Connecticut attorney general’s Aug. 26 complaint adds a different procedural posture. Rather than only defending against Kalshi’s federal preemption suit, Connecticut is asking a state court to affirmatively stop Kalshi from offering sports event contracts to Connecticut residents. The attorney general’s announcement identifies the products as unlicensed sports wagers and ties the case to the consumer-protection structure Connecticut adopted when it legalized sports wagering in 2021.
The case also affects intermediaries that connect customers to Kalshi-listed contracts. The Connecticut Department of Consumer Protection’s Dec. 3, 2025 release identified Robinhood and Crypto.com among the platforms ordered to stop making sports event contracts or other unlicensed online gambling available to Connecticut residents. Oliver’s related Aug. 10 order in Coinbase Financial Markets likewise addressed a platform offering Kalshi’s sports event contracts through its own customer interface, and the court denied Coinbase’s preliminary-injunction request on the same core grounds.
What happens next in the Connecticut Kalshi cases?
Two proceedings now frame the Connecticut dispute. In state court, Connecticut is seeking an injunction that would bar Kalshi from offering the sports event contracts the state describes as unlicensed sports wagers. In federal court, Kalshi’s appeal asks the Second Circuit to review Oliver’s Aug. 10 refusal to block Connecticut enforcement.
The next legal milestones are the state court’s handling of Connecticut’s injunction request and the Second Circuit’s schedule for Kalshi’s appeal. Together, those proceedings will test whether Connecticut can use its gambling laws against a CFTC-registered exchange offering sports contracts, or whether Kalshi can move the dispute back onto federal commodities-law terrain.
