Connecticut Sues Kalshi Over Alleged Unlicensed Sports Betting

Connecticut has sued prediction market operator Kalshi, alleging the company is offering sports betting without a state gaming license and seeking court orders to stop the contracts from being offered to residents. The lawsuit adds to a broader legal fight over whether sports prediction markets fall under federal commodities regulation or state gambling laws.

Attorney General William Tong filed the lawsuit on August 26 at the request of the Connecticut Department of Consumer Protection. The state is seeking temporary and permanent injunctions, restitution, civil penalties and the surrender of revenue and profits it claims Kalshi earned through unlawful activity.

Kalshi allows users to buy and sell contracts tied to future events, including game winners, point spreads, season records and player statistics. Connecticut maintains those transactions amount to sports wagering because customers risk money based on athletic outcomes, regardless of how the products are labeled.

The case follows a December 2025 cease-and-desist order directing Kalshi, Robinhood Derivatives and Crypto.com to stop offering what state regulators described as unlicensed online sports wagering. Kalshi responded by suing Connecticut officials and asking a federal court to prevent the state from applying its gaming laws to the company.

Kalshi argues its event contracts are derivatives governed by the federal Commodity Exchange Act and traded on a market regulated by the Commodity Futures Trading Commission. That position relies on federal preemption, a doctrine that can prevent states from enforcing their own laws when federal law gives the national government controlling authority or when state and federal rules conflict. State officials maintain that gambling regulation remains within Connecticut’s authority.

U.S. District Judge Vernon Oliver rejected Kalshi’s request on August 10. He found that the company had not shown its contracts qualified as swaps under the Commodity Exchange Act or that federal law prevented Connecticut from applying its sports betting rules.

The complaint also alleges Kalshi allows people beginning at age 18 to use the platform even though Connecticut requires sports bettors to be at least 21. State officials further claim the company promoted its platform to younger audiences through paid online promoters and a college ambassador program, including at Yale University, while also offering contracts involving games played by Connecticut colleges such as UConn and Yale.

Connecticut is also pursuing claims under the Connecticut Unfair Trade Practices Act, or CUTPA, which prohibits unfair or deceptive business practices. The state argues that access by people under 21 and allegedly misleading representations about the legality and nature of the platform violated the consumer protection law.

Federal appeals courts have reached conflicting conclusions in similar disputes. The Third Circuit ruled in April that Kalshi had shown a reasonable likelihood that federal commodities law preempts New Jersey from applying its gambling laws. On August 28, the Ninth Circuit reached the opposite result in a Nevada case, finding Kalshi had not shown that the Commodity Exchange Act prevented the state from enforcing its gaming rules.

Kalshi has accused Connecticut of arbitrary and inconsistent enforcement, arguing that other prediction markets continue operating in the state while officials target the company.

Kalshi removed the lawsuit from Hartford Superior Court to the U.S. District Court for the District of Connecticut later the same day it was filed. The case remains pending, while Kalshi’s separate appeal of Oliver’s ruling is before the Second Circuit.