Connecticut files lawsuit against Kalshi for suspected unlicensed sports betting

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Connecticut looks to block Kalshi from providing sports-related prediction contracts to residents, raising a legal dispute over whether the company’s products fall under federal commodities regulation or the state’s sports wagering laws.

The state filed its lawsuit Wednesday and is seeking a court injunction against Kalshi, alleging that the online prediction market is operating a sports wagering business without the required Connecticut license. Attorney General William Tong, Gov. Ned Lamont, and Department of Consumer Protection Commissioner Bryan T. Cafferelli announced the action on Tuesday.

Kalshi runs an online exchange that allows users to purchase contracts tied to yes-or-no outcomes involving future events. In sports, these contracts can cover whether a team or player will win, the number of games a team or player will win during a season, league rankings, point totals, point spreads, and individual player statistics.

Connecticut officials argue that these products constitute gambling and not financial instruments. Tong stated that the protections imposed on licensed sports betting operators also apply to sports-related prediction contracts.

Gov. Ned Lamont

Tong mentioned that these protections are not currently provided on Kalshi and that the lawsuit aims to halt the company’s operations in the state.

The dispute arises from enforcement action taken by the Department of Consumer Protection’s Gaming Division in December 2025, which ordered Kalshi and two other platforms to cease conducting unlicensed online gambling, specifically sports wagering, in Connecticut. The companies were also instructed to withdraw any funds held on their platforms.

Cafferelli stated that the department has been closely monitoring the development of prediction markets from their inception “with great concern for the potential negative impacts on the public.”

“These markets have been engaging in a coordinated effort to portray themselves as offering investments that are somehow secure when in reality, they are indistinguishable from sports betting,” the commissioner said. “They target minors and individuals who have explicitly opted out, fail to comply with any of our technical standards designed to protect consumers’ funds and personal information, and violate all of Connecticut’s gaming laws.”

Kalshi challenged Connecticut’s enforcement action in federal court, arguing that its prediction contracts are “swaps” regulated exclusively by the federal Commodity Futures Trading Commission. The company sought a preliminary injunction to prevent the state from enforcing Connecticut law.

Earlier this month, U.S. District Judge Vernon Oliver denied Kalshi’s request for a preliminary injunction. Kalshi subsequently appealed the decision to the Second Circuit Court of Appeals. A judge also denied Kalshi’s ex parte relief Wednesday, and an in-person status conference is scheduled for September 17.

The regulatory dispute has extended beyond Connecticut. The CFTC has sued Connecticut and two other states, advancing the same argument as Kalshi that prediction markets are subject to exclusive federal regulation. Connecticut has filed a motion seeking dismissal of that lawsuit.

“These prediction markets pose a serious risk to Connecticut consumers, young people, our student athletes, and those struggling with gambling addiction. They have made it clear that their priority is profits over people, which is why we are holding them accountable,” Gov. Lamont said.

Kalshi’s head of litigation responded to the Connecticut lawsuit in a post on social media Wednesday night, describing the state’s actions as unequal treatment. The post indicated that Connecticut was seeking to immediately shut down Kalshi while allowing other prediction markets to continue operating in the meantime and emphasized the necessity of federal oversight.