A federal judge has mandated that Connecticut authorities suspend the implementation of a cease-and-desist order against Kalshi, a prediction market operator, providing the company with temporary relief as a significant legal dispute regarding state versus federal jurisdiction over event-contract trading develops.
This ruling halts the state’s enforcement actions until the U.S. District Court hearing on February 12, which may signal whether federal commodities law supersedes state gambling regulations. This suspension follows Kalshi’s legal action against the Connecticut Department of Consumer Protection (DCP), an acknowledgment formally reinforced by a joint stipulation that established the litigation timeline.
According to the schedule, the DCP is required to submit its response by January 9, with Kalshi’s rejoinder expected by January 30, prior to the February 12 hearing.
Connecticut issued cease-and-desist notices earlier in December to Kalshi, Robinhood, and Crypto.com, instructing them to discontinue the provision of sports-related prediction markets within state boundaries. Regulators asserted that these companies were essentially engaging in unauthorized sports betting. Named as defendants are DCP Commissioner Bryan Cafferelli, Gaming Director Kristofer Gilman, and Attorney General William Tong.
Kalshi contends that the state lacks the authority to limit its markets, as its contracts fall under the exclusive purview of the Commodity Futures Trading Commission (CFTC). The company expressed that the C&D order was unexpected, following what it perceived as productive negotiations with regulators. The demand for immediate compliance was “sudden and unexpected… [which] compelled Kalshi to file the accompanying complaint… seeking both declaratory and injunctive relief,” as stated by the company’s attorney.
Kalshi asserts that without a preliminary injunction, it could incur significant damages.
In contrast, Connecticut has detailed seven risks it believes render prediction markets illegal and hazardous, including the lack of technical standards, insufficient integrity controls, and absence of dispute-resolution methods, alongside offering contracts on predetermined outcome events. Regulators also highlighted issues related to advertising toward individuals who have self-excluded and permitting access to users aged 18 and over, whereas state sports betting mandates a minimum age of 21.
This Connecticut situation arises amidst increasing scrutiny of prediction markets across the United States. Massachusetts has filed a separate complaint aiming to prohibit Kalshi’s sports-based markets, and at least nine jurisdictions have issued cease-and-desist orders claiming the company operates an unlicensed sportsbook. Kalshi encountered another challenge in Nevada, where a federal judge determined the firm must adhere to state gaming regulations, asserting that outcomes of sports contests do not qualify as “events” under federal commodities law.
The approaching February hearing is poised to evaluate the limits of federal financial regulation in relation to state gambling authority as prediction markets increasingly draw attention nationwide.