Connecticut is taking legal action to prevent Kalshi from providing sports prediction contracts to its residents. This dispute centers on whether Kalshi's offerings should be regulated under federal commodities law or the state's sports betting regulations.
The lawsuit was filed on Wednesday, with state officials seeking a court injunction against Kalshi. They allege that the online prediction platform is operating a sports betting business without the necessary license from Connecticut. Attorney General William Tong, Governor Ned Lamont, and Department of Consumer Protection Commissioner Bryan T. Cafferelli announced the lawsuit on Tuesday.
Kalshi runs an online exchange where users can purchase contracts related to yes-or-no outcomes for future events. In the realm of sports, these contracts can pertain to various outcomes, such as whether a specific team or player will win, the total number of games won in a season, league standings, point totals, point spreads, and individual player statistics.
State officials contend that these contracts constitute gambling rather than financial instruments. Attorney General Tong emphasized that the regulations designed for licensed sports betting operators should also apply to sports prediction contracts. He stated, “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 highlighted the importance of these laws, which are intended to protect minors, prevent gambling addiction, and ensure the safety of consumers' money and personal information. He expressed concern that Kalshi currently does not provide these protections, which is why the lawsuit aims to halt the company's operations in Connecticut.
This legal action follows a previous enforcement effort by the Department of Consumer Protection’s Gaming Division in December 2025, which ordered Kalshi and two other platforms to stop conducting unlicensed online gambling, specifically sports betting, in Connecticut. The companies were also instructed to withdraw any funds held on their platforms.
Commissioner Cafferelli noted that the department has been monitoring the evolution of prediction markets since their inception, expressing concern over their potential negative effects on the public. He stated, “These markets have been waging a coordinated campaign to convince people they are offering investments that are somehow safe when the reality is they are indistinguishable from sports wagering.” He added that these markets often target minors and individuals who have opted out of gambling, failing to comply with technical standards designed to protect consumers.
Kalshi has contested Connecticut’s enforcement in federal court, asserting that its prediction contracts are “swaps” regulated solely by the federal Commodity Futures Trading Commission. The company sought a preliminary injunction to prevent the state from enforcing its laws.
Earlier this month, U.S. District Judge Vernon Oliver denied Kalshi’s request for a preliminary injunction. Subsequently, Kalshi appealed this decision to the Second Circuit Court of Appeals. A judge also rejected Kalshi’s emergency relief request on Wednesday, with an in-person status conference scheduled for September 17.
The regulatory conflict has extended beyond Connecticut, as the CFTC has filed a lawsuit against Connecticut and two other states, supporting Kalshi's position that prediction markets fall under federal regulation. Connecticut has responded with a motion to dismiss this lawsuit.
Governor Lamont expressed concern about the risks posed by these prediction markets, stating, “These prediction markets put Connecticut consumers, young people, our student athletes, and those suffering from gambling addiction at serious risk.”