Connecticut court denies appeal by Kalshi against enforcement of state sports wagering laws

Kelsey Wilhelm

11 August 2026 at 5:36am UTC-4

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The US District Court of Connecticut has reportedly denied an appeal by prediction market operator Kalshi for a preliminary injunction, allowing the state to move forward in enforcing its gambling laws.

District of Connecticut Judge Vernon D. Oliver on Monday denied Kalshi’s motion, affirming that sports events contracts don’t meet the statutory definition of a swap under the Commodity Exchange Act (CEA).

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The judge noted this is because Kalshi’s sports-event contracts “do not depend on whether an underlying sporting event occurs, fails to occur, or occurs to a particular extent. Instead, Kalshi’s sports-event contracts depend on the event’s outcomes or discrete in-game occurrences.”

As noted by Sports Betting Dime, the judge furthered that “Kalshi itself has touted its platform as offering legal sports betting nationwide,” noting that “sports wagering has long been subject to state regulation pursuant to the states’ police powers because of the significant public interests and risks associated with gambling.”

In the filing, the judge furthers that “The Court declines to conclude either that these sports wagers are properly categorized as swaps and fall under the CFTC’s authority, or that Congress clearly displaced Connecticut’s traditional authority to regulate sports wagering and vested that authority in the CFTC, an agency that has not historically regulated sports wagering and has not exercised meaningful oversight over Kalshi’s sports event contract.”

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The filing also indicated that the court was “not persuaded by Kalshi’s argument that its users will suffer harm if it is made to unwind ongoing sports-event contracts,” highlighting that “Kalshi has been on notice of the potential for state enforcement against its contracts since it began offering them.”

The judge indicated that any “resulting harm to Kalshi’s approximately 24,000 Connecticut users from unwinding existing contracts does not outweigh the State’s and the public’s strong interests in enforcing Connecticut’s gaming laws.”

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The Backstory

Conflicting rulings deepen the regulatory split

The Connecticut decision adds another state-level win for gambling regulators in a fast-moving fight over whether sports prediction contracts are federally regulated derivatives or state-regulated wagers. The ruling is significant because it rejects one of Kalshi’s central arguments: that sports event contracts fall within the Commodity Exchange Act and therefore sit beyond the reach of state gambling laws.

That question has become the fault line in litigation across the country. Kalshi, a federally registered prediction market, has argued that its contracts are swaps overseen by the Commodity Futures Trading Commission. States have countered that contracts tied to the outcome of games or in-game events function like sports bets and should be subject to licensing, consumer protection, taxation and enforcement regimes already built around legalized wagering.

The Connecticut court sided with the state’s view, emphasizing that state authority over gambling has long been grounded in police powers and public-interest concerns. The decision does not settle the national debate, but it strengthens the hand of regulators arguing that federal commodities law did not quietly displace state sports betting rules.

Kalshi’s early wins have not produced a clear path

Kalshi has had some success persuading federal judges that state enforcement should be paused while broader questions are litigated. A federal judge in Tennessee recently gave the company a notable victory by issuing a preliminary injunction against state officials. In that case, Judge Aleta Trauger accepted Kalshi’s position that sports event contracts can qualify as swaps under the Commodity Exchange Act, temporarily placing them outside Tennessee’s unlicensed gambling enforcement framework.

That ruling, covered in the Tennessee preliminary injunction decision, illustrates why the legal landscape remains unstable. The Tennessee court rejected regulators’ effort to distinguish an event’s “outcome” from an “occurrence,” concluding that an outcome can itself be an occurrence. That reasoning gives Kalshi a legal foothold in one jurisdiction and a template for appeals elsewhere.

But the company’s victories have been uneven. Courts have not agreed on whether the contracts are swaps, whether the Commodity Exchange Act preempts state gambling laws or how much deference is owed to the CFTC. The result is a patchwork in which Kalshi may win emergency relief in one state while facing enforcement risk in another. For a business model built on national liquidity and uniform market access, that fragmentation is a direct operational threat.

State regulators are gaining momentum

Several recent rulings have favored state enforcement. In Ohio, a federal judge refused to block regulators from applying sports betting laws to sports event contracts, finding that wagers tied to game outcomes did not resemble traditional swaps connected to commodity prices, exchange rates or similar financial benchmarks. The ruling, detailed in Ohio’s enforcement win against Kalshi, reinforced the argument that sports contracts look more like betting products than derivatives.

Utah also prevailed when a federal judge rejected Kalshi’s claim that federal law preempts the state’s anti-gambling statutes. The court reasoned that Congress could not have intended to preserve state gambling authority while requiring states to permit access to event contracts they define as illegal gambling. That decision, described in the Utah ruling allowing enforcement against prediction markets, came after lawmakers clarified that bets on individual actions, statistics, occurrences or non-occurrences may constitute gambling under state law.

New York has also joined the group of states resisting Kalshi’s federal preemption theory. After a district court denied the company’s request to block enforcement by the New York State Gaming Commission, Kalshi filed an immediate appeal to the 2nd US Circuit Court of Appeals. The case, covered in Kalshi’s appeal after the New York ruling, is especially relevant to Connecticut because both states fall within the 2nd Circuit. Any appellate ruling there could influence how federal courts across the region treat sports event contracts.

The CFTC’s role complicates state enforcement

The Commodity Futures Trading Commission has become central to the dispute, not only because Kalshi relies on federal oversight as its legal foundation, but because the agency has taken steps that appear to support a national-market approach. Kalshi argues that as a federally regulated exchange, it cannot be forced to alter access state by state without undermining the structure of commodities regulation.

That tension was visible in Michigan, where a state court temporarily blocked Kalshi from offering sports event contracts and the CFTC later ordered the company to honor pending trades from Michigan residents. Michigan Attorney General Dana Nessel’s office objected, saying the agency’s action undermined the state’s ability to regulate online sports betting and enforce tax law. The dispute, outlined in Michigan’s response to the CFTC order on Kalshi trades, shows how federal market-integrity concerns can collide with state gambling enforcement.

The CFTC’s position creates practical and legal complexity. If prediction markets must operate as a single national market, state-by-state prohibitions could impair liquidity, contract settlement and equal access. If states retain full authority to treat sports contracts as gambling, federal registration does not insulate operators from licensing demands or enforcement actions. Courts are being asked to define the boundary between those regimes in real time.

Sports betting law is the broader battleground

The stakes extend beyond Kalshi. Since the US Supreme Court opened the door to state-regulated sports betting in 2018, states have built licensing systems that generate tax revenue, impose advertising rules, require responsible-gambling safeguards and police market conduct. Prediction markets threaten to create a parallel channel for sports wagering that may not fit within those systems.

For states, the concern is not just legal classification. If sports event contracts can be offered nationwide under federal commodities law, operators could potentially avoid state licensing fees, betting taxes and consumer-protection requirements. That would create an uneven competitive field with sportsbooks that spent heavily to enter regulated markets. It also could reduce states’ leverage over integrity monitoring, age verification and problem-gambling controls.

For Kalshi and similar platforms, the inverse risk is that each state can define the same federally listed contract as illegal gambling. That would limit scalability and undermine the premise of a national exchange. The company’s appeals in New York, Utah and other jurisdictions are aimed at preventing that outcome, but inconsistent district court rulings make a higher-court resolution increasingly likely.

Connecticut increases pressure for appellate clarity

The Connecticut ruling matters because it arrives as courts are building a record of sharply divergent interpretations. Tennessee has accepted Kalshi’s swap argument at the preliminary stage, while Connecticut, Ohio, Utah and New York have been more receptive to state authority. Michigan has highlighted the added complication of pending trades and federal exchange obligations.

That split raises the likelihood that appeals courts, and possibly the Supreme Court, will eventually have to decide whether sports event contracts are derivatives, wagers or something that requires a new regulatory framework. Until then, operators face uncertainty over where they can offer contracts, regulators face pressure to enforce existing gambling laws and sportsbooks are watching whether a federally regulated competitor can bypass the state-by-state model.

Connecticut’s decision does not end Kalshi’s case, but it reinforces a trend among several courts that have declined to treat sports prediction contracts as automatically shielded by the Commodity Exchange Act. For now, the ruling strengthens state regulators’ argument that when a product depends on who wins, loses or scores, it can be regulated as gambling regardless of the platform’s federal status.