Connecticut has sued prediction market platform Kalshi and asked a court to stop it offering sports event contracts that state officials classify as unlicensed sports wagering.
The state’s Attorney General’s Office said on Wednesday that Attorney General William Tong, Department of Consumer Protection Commissioner Bryan T. Cafferelli and Governor Ned Lamont were seeking an injunction requiring Kalshi to withdraw the contracts from the Connecticut market.
Connecticut officials argue that contracts based on sporting outcomes fall under the state’s gambling laws, despite Kalshi operating as a federally regulated derivatives exchange. The lawsuit is the latest development in a dispute that began in December 2025 and is unfolding alongside separate federal proceedings involving the Commodity Futures Trading Commission (CFTC).
State officials say Kalshi has continued to offer sports markets without the licences required by Connecticut sportsbook operators. Sports wagering was legalised in Connecticut in 2021 under a system that requires licensed operators to meet consumer protection, age-verification and other regulatory standards.
Lamont said prediction market companies should not be permitted to operate outside the framework established for licensed sportsbooks.
The dispute began in December 2025, when Connecticut’s Department of Consumer Protection ordered Kalshi, Robinhood and Crypto.com to stop promoting and offering sports event contracts to state residents. Regulators classified the products as unlicensed online gambling and said the three companies did not have the licences needed to provide sports wagering in Connecticut.
Officials also expressed concerns about whether people below the state’s legal sports betting age of 21 could access the contracts, safeguards against insider wagering and the technical requirements imposed on licensed operators. The companies were ordered to halt the products, although customers were allowed to withdraw their funds.
Kalshi challenged the action in federal court the following day. It argued that Connecticut was trying to regulate contracts governed by federal commodities legislation.
The company’s case relies on its status as a designated contract market regulated by the CFTC. Kalshi received that designation in 2020 and says contracts traded on its exchange are derivatives subject to federal oversight under the Commodity Exchange Act.
Kalshi argues that the CFTC has exclusive authority over contracts listed on federally registered designated contract markets. On that basis, it says individual states cannot apply their gambling laws to those products.
Connecticut rejects that interpretation. The state maintains that federal oversight of derivatives does not prevent it from enforcing laws governing sports wagering.
The legal dispute suffered a setback for Kalshi earlier this month when US District Judge Vernon Oliver rejected its request for a preliminary injunction. The company had sought to prevent Connecticut officials from enforcing state gambling laws while the federal case continued.
Kalshi has appealed that decision to the US Court of Appeals for the Second Circuit.
Jovy Dedaj, Kalshi’s head of litigation, criticised Connecticut’s new lawsuit in a post on X, describing it as “the latest in a line of arbitrary and inconsistent enforcement.”
Dedaj also argued that other prediction market operators remained active in Connecticut while the state pursued action against Kalshi.
“This unequal treatment is exactly why federal oversight is necessary,” he said.
Kalshi has made the same federal pre-emption argument in several states where regulators have treated sports event contracts as gambling products.
In July, a New York federal court rejected one of the company’s attempts to prevent enforcement of state gambling laws. US District Judge Analisa Torres ruled that Kalshi had not shown at the preliminary stage that the Commodity Exchange Act was likely to override New York’s authority over sports event contracts.
That decision allowed New York’s enforcement case to continue while Kalshi pursued its wider legal challenge. Later in the same month, the court also refused Kalshi’s request for emergency protection while the New York ruling was appealed, without deciding the underlying dispute.
The company is also facing action from the federal government. In April, the CFTC and Department of Justice sued Connecticut, Illinois and Arizona, claiming that state officials were interfering with federal authority over designated contract markets.
The federal government argued that contracts listed by CFTC-regulated exchanges fall under the Commodity Exchange Act and cannot be independently prohibited by state gaming authorities simply because they involve sporting events.
CFTC chair Michael Selig said the regulator would defend what it regards as its exclusive authority over the markets.
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” Selig said.
Connecticut is opposing that federal lawsuit while pursuing its own case against Kalshi. As a result, the same question of jurisdiction is being considered through separate legal proceedings.
The central issue is whether contracts based on sports results remain federally regulated derivatives when traded through a designated contract market, or whether they can also be treated as sports wagering under state law.
State regulators have secured several early victories in similar cases across the United States. In Washington, a state judge blocked Kalshi’s sports markets in July after granting the state’s request for a preliminary injunction.
King County Superior Court Judge John McHale ruled that Washington was likely to succeed in arguing that Kalshi’s activities breached state gambling laws. Kalshi had again claimed that federal commodities legislation prevented the state from regulating its event contracts.
The disputes form part of a growing series of cases involving Kalshi and Polymarket. More than a dozen states are involved in enforcement actions, cease-and-desist orders or related court battles over prediction markets.
State officials generally argue that sports event contracts operate like sports bets because customers stake money on the outcome of matches and competitions. Kalshi says the products are legally different because users trade standardised contracts through an exchange regulated under federal commodities law.
Local authorities have begun making similar claims. Earlier this month, Baltimore sued Kalshi and Polymarket, alleging that sports event contracts offered through their platforms amounted to illegal gambling.
Baltimore’s case against Kalshi also named Coinbase, Robinhood and Webull, which have given customers access to prediction market products through partnerships or distribution arrangements.
Connecticut’s case will continue as Kalshi appeals the earlier federal ruling before the Second Circuit and the CFTC pursues its separate challenge to the state’s authority over federally registered prediction markets.
