Kalshi fights back against Connecticut lawsuit, wins temporary pause
The prediction market platform saga in the US has taken another twist as Kalshi has won a temporary pause against a Connecticut gambling order preventing the platform from operating in the state.
US District Judge Vernon Oliver issued the ruling on Monday, temporarily preventing the state from enforcing a cease-and-desist notice that the state’s regulator, the Connecticut Department of Consumer Protection, issued on December 2.
Connecticut also issued cease-and-desist letters to Robinhood Derivatives and Crypto.com over similar allegations of operating in the state without a license.
In the cease-and-desist order, the department had ruled that Kalshi must stop offering what they argued was unlicensed online gambling.
In response, Kalshi filed a complaint uncovered by Law.com against the Department of Consumer Protection, asserting that its operations are regulated under the federal framework overseen by the Commodity Futures Trading Commission, and thus exempt from state gambling laws.
This is just one of many battles states are currently waging against the prediction market industry.
Connecticut has joined the likes of Arizona, Illinois, Maryland, Massachusetts, Montana, Nevada, New Jersey, New York, and Ohio as states that have issued cease-and-desist orders or launched legal actions against these platforms.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
A fast-moving fight over who regulates “event contracts”
Kalshi’s clash with Connecticut is the latest turn in a nationwide test of whether sports-themed prediction markets fall under federal derivatives oversight or state gambling law. The platform frames its contracts as swaps regulated by the Commodity Futures Trading Commission. State regulators say many of those contracts look like ordinary bets and must follow local rules for sports wagering. That core jurisdictional dispute is now playing out in multiple courts with uneven results and rising stakes for users, sportsbooks and state agencies.
Connecticut moved in early December to halt sports contracts on several platforms. The Department of Consumer Protection’s Gaming Division issued cease-and-desist letters to Kalshi, Robinhood Derivatives and Crypto.com, calling the offerings unlicensed online gambling and warning of potential criminal liability for noncompliance. The orders cite consumer risks such as inadequate age checks and limited payout safeguards, as well as the absence of state oversight. The agency later published formal notices, including the Kalshi cease-and-desist order, along with parallel letters aimed at Robinhood Derivatives and Crypto.com. Kalshi responded by suing in federal court, arguing preemption under the Commodity Exchange Act. The Connecticut case echoes a broader state push that has also surfaced in Arizona, Illinois, Maryland, Massachusetts, Montana, Nevada, New Jersey, New York and Ohio.
The state’s enforcement posture rests on a simple view: If a contract’s outcome hinges on a sporting event, it should be treated like a sports wager. Kalshi counters that its markets are federally cleared and settled swaps on a designated contract market, and that states cannot impose duplicative or conflicting regimes. How courts draw that line will influence whether these products migrate toward financial regulation, gaming rules or a hybrid model.
Connecticut’s move fits a broader state crackdown
Connecticut’s orders landed as other jurisdictions escalated. Massachusetts sued Kalshi for promoting and taking sports wagers without state approval. Ohio warned licensed books that partnering with unlicensed prediction markets, even outside state lines, could endanger their permits. New York and New Jersey signaled scrutiny. Tribes in Arizona raised exclusivity concerns about sports betting rights. The pattern is clear: states view sports event contracts as sports betting by another name.
Inside Connecticut, the agency amplified consumer-protection themes. The department highlighted age limits, data security and insider risk as reasons to treat the products like gambling and keep them inside state-licensed channels. It also emphasized that even if an operator held a Connecticut betting license, the specific contract types might still violate policy. Those arguments mirror the narrative regulators advanced in other states and foreshadow the issues likely to be tested in court.
For context on the scope of the state actions, see our coverage of the orders that Connecticut issued to stop sports contracts, which put warning shots across multiple platforms at once.
Nevada’s courtroom swings shape expectations
Nevada became an early bellwether. The Nevada Gaming Control Board issued a cease-and-desist to Kalshi and made its case that the company’s sports-linked contracts were unlicensed wagers under state law. The agency publicized the matter in formal communications, including a March notice detailing its cease-and-desist order and a related news release. Kalshi sued state regulators, initially winning a temporary injunction that paused enforcement. The industry watched closely as the case tested whether a federally regulated exchange could keep operating sports markets inside a state that tightly controls gambling.
The dynamics changed as the litigation developed. A district court later allowed the Nevada Resort Association to join the case, citing potential competitive harm to licensed casinos if Kalshi prevailed. Judge Andrew Gordon noted the risk that exchange-style markets could undercut Nevada books that must comply with age limits and bet-type restrictions. That intervention was reported in coverage of the resort group’s entry into the suit.
Then the court reversed course. In a ruling described in our report on the Nevada decision, Judge Gordon found that contracts keyed to sporting outcomes were not swaps and thus fell outside the CFTC’s exclusive jurisdiction. With that, the injunction lifted and regulators could resume enforcement. The opinion leaned on examples such as touchdown-timing markets and concluded the products resembled betting more than hedging. Kalshi sought emergency relief to preserve operations pending appeal. The mixed outcome in Nevada has become a reference point for other judges weighing similar preemption claims.
Maryland and Ohio broaden the legal map
As enforcement spread, Kalshi went on offense in other courts. In Maryland, the company sued the state’s lottery and gaming regulator after receiving a cease-and-desist, arguing federal preemption and asking for a preliminary injunction. The case underscores how platforms are using the same jurisdictional theory in multiple venues while states coordinate responses. See details in our story on Kalshi’s Maryland filing.
In Ohio, Kalshi filed a federal suit against the casino regulator and the attorney general’s office, saying threats of enforcement chilled partnerships and harmed the business. Ohio warned licensed operators that ties to unlicensed prediction markets could have licensing consequences even beyond state borders. Kalshi asked the court for an injunction to block the state from interfering with its operations. Read more in our coverage of the Ohio lawsuit.
The wave of cases is building a patchwork of rulings. Some judges have been receptive to near-term pauses to preserve the status quo. Others have treated sports-linked event contracts as bets under state law. Appeals are likely, and industry lawyers expect the jurisdictional question to reach higher courts.
Why the outcome matters
The stakes run beyond a single platform. If federal preemption wins the day for sports event contracts, states could lose control over a growing slice of online wagering they view as gambling. That would complicate tax policy, consumer safeguards and competitive balance for licensed sportsbooks. If states prevail, prediction markets may need to exit sports themes or seek local licenses that come with age gates, marketing limits and responsible gaming requirements.
Casinos and mobile books are watching for spillover risks. Nevada’s resort industry pushed to be heard because exchange-like markets could divert handle without bearing the same compliance costs. States that run sports betting as a public-private partnership worry about erosion of tax revenue and oversight. Users face uncertainty over market continuity, settlement timing and access as courts toggle between injunctions and enforcement.
What to watch next
Several procedural threads will shape the next phase. In Connecticut, federal filings and any subsequent orders will test how another court reads the preemption argument in light of Nevada. Case materials, including entries in KalshiEX LLC v. Cafferelli, will signal timing and scope. In Nevada, appeals could refine Judge Gordon’s sports-contract analysis. Maryland and Ohio will add more data points on when and how courts curb state action while litigation proceeds.
Meanwhile, regulators are coordinating. Connecticut paired its Kalshi order with parallel letters to Robinhood and Crypto.com to close perceived gaps. Other states may follow with broader, platform-agnostic directives meant to keep sports wagering inside licensed channels. Until appellate courts impose uniformity, the landscape will remain fragmented, and operators will face state-by-state rules that turn off and on as cases advance.
