Connecticut has escalated its campaign against Kalshi by asking a court to stop the prediction-market platform from offering sports-related event contracts in the state, framing the products as unlicensed sports wagers rather than federally regulated derivatives.
Attorney General William Tong announced the lawsuit on Wednesday, seeking an injunction that would force Kalshi to stop making sports contracts available to Connecticut users. The complaint argues that the contracts fall within the state’s gambling and consumer-protection laws, placing Kalshi’s offerings in direct conflict with Connecticut’s regulated sports-betting system.
The filing deepens a jurisdictional dispute that has already produced dueling lawsuits between Kalshi and Connecticut officials. At its center is a question with consequences well beyond one state: whether contracts allowing users to trade on sporting outcomes belong under federal commodities law or state gambling rules.
Governor Ned Lamont linked the case to Connecticut’s 2021 sports-wagering law, under which licensed operators are subject to state oversight and consumer safeguards. Connecticut’s position is that companies cannot offer products tied to sports results outside that framework simply by presenting them as financial contracts.
State seeks to enforce its sports-betting rules
Connecticut’s complaint asks the court to block Kalshi from offering what the state calls sports-event contracts to residents. These contracts allow users to take positions on the outcome of games and other sports-related events, with payouts based on whether a stated result occurs.
State officials contend that the economic function of those contracts resembles sports wagering. Kalshi has maintained that its markets are derivatives regulated by the Commodity Futures Trading Commission, the federal agency responsible for U.S. commodities markets.
The dispute reflects a growing divide over products commonly described as prediction markets. Supporters argue that event contracts can be used to express views on the probability of real-world outcomes. State gambling authorities have focused on contracts tied to sports, saying the products can operate much like bets available through sportsbooks.
Connecticut has an established legal sports-betting market, and Lamont’s administration has argued that permitting unlicensed event-contract providers to serve residents would undermine the rules that govern licensed operators. Those rules cover areas including consumer protection, eligibility controls and responsible-gaming requirements.
Kalshi’s earlier challenge remains on appeal
The state’s lawsuit follows a December 2025 order by Connecticut’s Department of Consumer Protection directing Kalshi, Robinhood and Crypto.com to stop promoting and offering sports event contracts in the state.
Kalshi responded the following day with its own lawsuit against Connecticut officials. The company argued that its contracts are federally regulated derivatives and cited its status as a designated contract market, granted by the CFTC in 2020.
A designated contract market is a trading venue authorized by the CFTC to list certain derivatives products. Kalshi’s legal argument is that federal commodities regulation preempts state attempts to classify those contracts as gambling activity.
Earlier this month, Judge Vernon Oliver denied Kalshi’s request for a preliminary injunction that would have prevented Connecticut from enforcing its order while litigation continued. The ruling did not settle the underlying jurisdictional issue, but it left the state free to pursue enforcement during the case.
Kalshi has appealed the decision to the U.S. Court of Appeals for the Second Circuit. That appeal will run alongside Connecticut’s newly filed enforcement suit, creating parallel legal tracks around the same question of regulatory authority.
The denial of preliminary relief places practical pressure on Kalshi’s Connecticut operations. A company can ultimately prevail in a legal challenge yet still face restrictions while a case moves through the courts, particularly when a judge declines to pause state action at the outset.
Federal agency has challenged state restrictions
The conflict has also reached federal court through a separate CFTC lawsuit filed in April against Connecticut, Arizona and Illinois. According to the supplied account of that case, the CFTC argued that states cannot prohibit CFTC-registered designated contract markets.
CFTC Chair Michael Selig said when the action was filed that the agency would defend its authority over the markets and protect market participants from state regulators. The agency’s position places it on the opposite side of Connecticut officials, who say sports-linked contracts should be subject to local gambling rules regardless of the platform’s federal registration.
That disagreement could create an uneven national map for prediction-market operators. A platform may claim federal authorization while facing cease-and-desist orders, civil litigation or access restrictions in individual states. The eventual court decisions could determine whether sports-event contracts can be offered nationally under a single federal regime or require separate treatment under state wagering laws.
Connecticut is not alone in taking action. More than a dozen states have taken enforcement measures or brought lawsuits against Kalshi over sports event contracts, according to the material provided.
A Washington court earlier this month ordered Kalshi to stop offering prediction markets tied to sports, elections, politics, entertainment, culture, technology and science within the state. The breadth of that order suggests that some state-level challenges extend beyond sports, even though sports contracts have become the most visible flashpoint.
Baltimore also sued Kalshi and Polymarket this month, alleging that their sports-event contracts constitute illegal gambling under Maryland law. The city’s case adds another layer to the patchwork, since enforcement can come from municipal as well as state authorities.
Sports contracts face the sharpest legal test
Sports markets have become the most contentious category because they closely resemble products already offered by licensed sportsbooks. A contract on the winner of a game can differ in structure from a conventional wager, but state regulators are focusing on the practical result: users risk money on sporting outcomes and receive a payout when their prediction is correct.
Kalshi and federal regulators view the same activity through the lens of derivatives-market oversight. The competing classifications leave courts to weigh federal preemption, the scope of the Commodity Exchange Act and states’ traditional authority over gambling within their borders.
The outcome will influence more than access to a single platform in Connecticut. If courts uphold the state’s view, prediction-market firms could face state-by-state limits for sports products, even when operating under CFTC oversight. A ruling favoring Kalshi’s federal preemption argument would narrow the ability of states to apply their gambling laws to CFTC-regulated event contracts.
For now, the Connecticut case keeps the dispute active on several fronts: a state enforcement action, Kalshi’s appeal in the Second Circuit and the CFTC’s separate lawsuit against Connecticut and other states. The immediate question for the court is whether Kalshi can continue offering sports-related contracts to Connecticut users while that larger regulatory conflict remains unresolved.
Curious how regulated event contracts work compared with Kalshi’s disputed markets? Explore compliant structures and risk rules in detail.
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