Connecticut Sues Kalshi in Bid to Shut Down Its Sports Markets
Key Points
- Connecticut is seeking temporary and permanent injunctions that would stop Kalshi from offering 'unlicensed sports wagering' in the state. The complaint also seeks restitution, disgorgement and civil penalties.
- Kalshi argues its prediction markets operate under federal commodities law, but a federal judge rejected its request to block Connecticut enforcement earlier this month.
- The federal court said Kalshi had approximately 24,000 Connecticut users when weighing the potential impact of state enforcement.
- Kalshi’s appeal remains alive, although a Second Circuit judge denied temporary relief on August 19 and sent its broader injunction request to a three-judge panel.
Connecticut Moves From Defense to Enforcement
Connecticut filed a verified complaint against Kalshi in Hartford Superior Court on August 26, escalating a dispute that began when the Department of Consumer Protection ordered Kalshi, Robinhood and Crypto.com to stop offering sports event contracts in December 2025.
The state now wants a court order that would directly prevent Kalshi from offering what Connecticut defines as sports wagering without a license.
The 24-page complaint goes further than the original cease-and-desist action. Connecticut is seeking temporary and permanent injunctive relief, restitution for consumers, disgorgement of revenues and profits, and civil penalties under the Connecticut Unfair Trade Practices Act.
The state alleges Kalshi has offered sports wagers to residents since January 2025 without obtaining a Connecticut wagering license.
Connecticut says Kalshi is operating outside its betting rules
The state’s case rests on the argument that the economic form of an event contract does not change what happens at the consumer level. Kalshi offers markets on winners, point spreads, player statistics and other sporting outcomes. Connecticut says those products fall within its statutory definition of sports wagering and therefore require a state license.
Attorney General William Tong put the state’s position plainly in an August 26 statement, saying sports event contracts are “no different than sports betting.”
The complaint also alleges that Kalshi’s minimum age of 18 conflicts with Connecticut’s 21-and-over sports wagering rules and that its product operates outside state requirements covering self-exclusion, financial controls, advertising and wagering integrity.
Those are allegations in the state’s complaint and have not been established as liability in the new case.
Kalshi’s federal argument has already taken a hit
Kalshi sued Connecticut officials in December after receiving the cease-and-desist order, arguing that its event contracts are federally regulated derivatives and that the Commodity Exchange Act preempts state gambling law.
U.S. District Judge Vernon D. Oliver denied Kalshi’s preliminary injunction request in an order entered August 10. The court concluded at that stage that the sports contracts did not qualify as swaps under the Commodity Exchange Act and that Congress had not displaced Connecticut’s traditional authority over sports wagering. Quoting an earlier Nevada decision, Oliver wrote that “at bottom, they are sports wagers.”
Kalshi appealed to the Second Circuit and sought protection from state enforcement while that appeal proceeds. Judge Oliver denied an emergency injunction on August 15. Four days later, Second Circuit Judge Sarah A. L. Merriam denied Kalshi’s request for temporary relief but referred the broader injunction motion to a three-judge panel, where it will be considered alongside Kalshi’s similar New York dispute.
Kalshi is also challenging Connecticut’s latest move publicly. Head of Litigation Jovy Dedaj called it “arbitrary and inconsistent enforcement” in an X post, arguing that other prediction markets remain available in the state and that the uneven treatment supports federal oversight.
Connecticut’s tribal gaming structure adds another layer
Connecticut’s position also reflects how the state built its legal sports betting market. Under the framework enacted in 2021, master sports wagering licenses are tied to the Mashantucket Pequot Tribe, the Mohegan Tribe and the Connecticut Lottery Corporation. The system grew out of agreements between the state and the two tribes that expanded their existing gaming arrangements to online wagering.
Governor Ned Lamont emphasized that relationship when announcing the Kalshi lawsuit, saying the state legalized sports wagering “in coordination with our tribal partners.” Connecticut therefore has more at stake than whether an unlicensed competitor is paying the same fees as regulated sportsbooks. The state is defending a gaming structure built around specific licensees, consumer rules and tribal agreements.
Why This Matters For Bettors
For Connecticut bettors, the immediate issue is access. Kalshi has roughly 24,000 users in the state according to the federal court record, and the new lawsuit specifically asks for an injunction against its sports wagering product. If Connecticut succeeds, those users could lose access to Kalshi’s sports contracts even while the broader federal appeal continues. The requested relief targets sports wagering, so the complaint does not automatically amount to a demand that every non-sports Kalshi market disappear.
There is also a consumer protection tradeoff at the center of the case. Connecticut requires licensed betting operators to follow state rules on age limits, self-exclusion, account controls, advertising, financial reserves and sports integrity. Kalshi operates under a federal derivatives framework instead. Bettors may see similar-looking products on both sides, but the regulatory protections, dispute channels and market restrictions attached to them are different.
The larger industry question is whether federal registration gives prediction markets a path around state sports wagering laws. If Kalshi ultimately wins that argument, a CFTC-regulated exchange could potentially offer sports contracts in states without going through the same licensing structure as conventional betting operators. That would put pressure on a market built around state licenses, taxes, tribal agreements and geographically restricted access.
If Connecticut wins on the merits, the opposite precedent becomes stronger. Federal commodities registration would provide no automatic passport into a state sports betting market, leaving prediction market operators exposed to state licensing and enforcement wherever their contracts are treated as wagers.
The Second Circuit therefore carries considerably more weight than one state dispute. A substantive appellate ruling on preemption would give operators and regulators something neither side currently has: controlling federal appellate guidance within the circuit on how state gambling authority interacts with sports event contracts.
What Happens Next
Kalshi’s most important near-term fight remains at the Second Circuit. Its request for temporary protection has already been denied, but a three-judge panel still has to consider the broader injunction request alongside Kalshi’s New York case. No final appellate ruling on the underlying preemption question has been issued.
Connecticut, meanwhile, can pursue its new enforcement case and seek an order shutting off Kalshi’s sports product. An injunction would directly affect bettors in the state. A later Second Circuit ruling could reach much further by clarifying how much room states have to regulate sports contracts offered through federally registered prediction markets.
Marcus has spent over 20 years navigating the legal side of online betting - from his early days consulting for offshore operators to helping licensed U.S. sportsbooks launch in regulated markets. He’s worked with compliance teams, reviewed licensing frameworks in 15+ states, and advised on some of the biggest regulatory shifts since PASPA was repealed.
At BettingScanner, Marcus serves as the voice of reason - translating legalese into plain English and helping bettors understand what’s legal, what’s risky, and where the gray areas live. If you’re ever unsure about the rules, Marcus is your man - as he probably helped write them.
