Kalshi has achieved a major procedural victory by obtaining a temporary halt to state enforcement efforts targeting its event-contract markets in its intensifying legal battle with Connecticut authorities. The platform can now claim that its CFTC-regulated derivatives shouldn’t be regarded as unauthorized gambling under state law due to the federal court’s intervention.
U.S. District Judge Vernon Oliver ordered on Monday that Connecticut’s Department of Consumer Protection (DCP) refrain from taking enforcement action against the derivatives trading firm. At the same time, the court considers the company’s motion for preliminary relief.
The ruling came after DCP accused Kalshi, Robinhood, and Crypto.com of providing unauthorized sports-related wagering and sent cease-and-desist warnings to them on December 2.
Connecticut challenges Kalshi over unlicensed operations
According to DCP Commissioner Bryan T. Cafferelli, only authorized organizations are permitted to provide sports betting in the state of Connecticut. He claimed that KalshiEX LLC, Robinhood Derivatives, LLC, and Crypto.com are not licensed to provide gambling in the Connecticut jurisdiction.
Cafferelli added that even if they were licensed, their contracts would break several other state laws and regulations, such as providing gambling to anyone under the age of 21.
“These platforms are operating outside of a regulatory environment, posing a serious risk to consumers who may not realize that wagers placed on these illegal platforms offer no protection for their money or information. A prediction market wager is not an investment.”
–Kris Gilman, Gaming Director, DCP.
Regulators identified several concerns associated with the unlicensed operations, including the lack of technical requirements for safeguarding customer data. The regulators also flagged the absence of protections against insider betting on events with predictable results, such as professional team transactions or award shows.
One day later, Kalshi retaliated by suing Connecticut authorities. The derivatives trading firm argued that its markets, which allow users to trade on future event outcomes, are regulated as derivatives products under the Commodity Futures Trading Commission’s (CFTC) supervision.
The prediction market platform said that Connecticut’s attempt to regulate its operations intrudes upon the federal framework Congress established to govern derivatives traded on authorized exchanges. Kalshi further stated that the state’s effort to regulate its operations is a field-preemptive and conflict-preemptive.
The prediction market provider argued that Connecticut’s gambling laws do not apply and that the state is overstepping its bounds because the CFTC gave Kalshi designated contract market status in 2020. The prediction market platform requested a temporary restraining order to stop Connecticut from taking any action that would interfere with its business.
Judge Oliver’s ruling grants Kalshi temporary protection as the case proceeds. According to the schedule established on Monday, Connecticut authorities are required to respond to the firm’s complaint by January 9, 2026.
The Judge also ruled that Connecticut authorities must provide more supporting arguments by January 30. Oral Judgement will happen in mid-February.
Kalshi faces state enforcement across multiple states
In 2025, Kalshi encountered comparable enforcement activities in Arizona, Illinois, Montana, Nevada, New Jersey, Maryland, and Ohio, among other states.
On October 9, Kalshi filed a lawsuit against the Ohio Attorney General and the Ohio Casino Control Commission in the U.S. District Court for the Southern District of Ohio. The prediction market platform requested a preliminary injunction to prevent Ohio from enforcing state gaming laws against its event contract platform.
According to the firm, it is regulated by the CFTC. The prediction market platform further stated that Ohio’s attempts to regulate its operations are superseded.
On April 3, Illinois casino regulators ordered Kalshi to cease providing prediction markets on sports betting. Illinois casino regulators claimed Kalshi’s contracts amount to illegal sports betting under state law.
The 5 Star IGaming Media reported that the division discovered that Kalshi Inc. was listing illegal sports bets for people in the State of Illinois after accessing the website through a mobile application at www.kalshi.com.
On May 22, Arizona’s gambling authority joined the state-by-state campaign against prediction markets in reaction to Kalshi and others’ event contracts on sports and other markets. The Arizona Department of Gaming (ADG) sent a cease-and-desist order to Kalshi and Crypto.com.
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