Regulation

    Connecticut Sues Kalshi to Block Sports Prediction Markets, Citing Consumer Protection and Underage Access

    Connecticut sued Kalshi on August 26, 2026 seeking a permanent injunction and civil penalties, calling its sports event contracts unlicensed sports wagering.

    By PredictionMarkets.usThursday, August 27, 20268 min read
    Connecticut Sues Kalshi to Block Sports Prediction Markets, Citing Consumer Protection and Underage Access

    Connecticut has escalated its months-long battle with Kalshi, filing a civil enforcement lawsuit on August 26, 2026 that seeks to permanently block the prediction market operator from offering sports-related contracts in the state. Attorney General William Tong, Governor Ned Lamont, and Department of Consumer Protection Commissioner Bryan T. Cafferelli jointly announced the action, which requests a permanent injunction, disgorgement of all revenue earned from Connecticut residents through unlicensed sports wagering, civil penalties, and restitution.

    The filing arrives as the national fight over prediction markets reaches a new intensity. The New York Times reported on August 27 that 20 states are currently locked in litigation over whether prediction markets are subject to state sports betting laws, with 44 state attorneys general signing a joint letter last month characterizing the platforms as a "new form of casino" preying on young people. Connecticut's complaint adds a sharper consumer protection and underage access angle than many prior state actions, and it arrives the day after Kalshi had already lost a key preliminary round in federal court.

    What Connecticut Is Alleging

    The complaint, initially filed in Hartford Superior Court before Kalshi removed it to federal court, centers on Kalshi's "sports event contracts" — yes-or-no propositions tied to sports outcomes including which team or player wins a game, the number of wins a team records in a season, league rankings, final point totals, point spreads, and individual player statistics.

    Connecticut authorizes online sports betting under a framework enacted in 2021. That framework requires licensed operators, sets the minimum wagering age at 21, and mandates technical standards for consumer data protection, problem gambling safeguards, and self-exclusion programs.

    "Sports event contracts are no different than sports betting and are not magically shielded by federal law from Connecticut's commonsense consumer protection laws," Attorney General Tong said in the announcement. "These laws exist for a reason — to protect minors, to prevent problem gambling, to ensure your money is safe and your personal information is protected. None of that is happening now on Kalshi, and we're suing to put a stop to it."

    Governor Lamont framed the lawsuit in direct terms: "These prediction markets put Connecticut consumers, young people, our student athletes, and those suffering from gambling addiction at serious risk. They have made it clear their goal is profits over people, and that's why we are holding them accountable. When we legalized sports wagering in 2021, the goal was to create a safe, responsibly regulated market for Connecticut consumers, not to open a free-for-all on sports betting."

    The complaint spans four counts seeking the following relief:

    Count One asks the court for temporary and permanent injunctive relief under Connecticut's gaming statute, plus disgorgement of all revenue Kalshi received from Connecticut residents through unlicensed sports wagering — or alternatively, the taxes, fees, and regulatory contributions a licensed operator would have owed.

    Count Two alleges violations of the Connecticut Unfair Trade Practices Act, pointing to Kalshi's marketing characterizations of its contracts as investments and to statements that Kalshi operated "the first nationwide legal sports betting platform" available legally in all 50 states. Connecticut characterizes those claims as misleading given the state's position that Kalshi was conducting unlicensed wagering.

    Count Three focuses on underage access. Connecticut's sports wagering laws define a minor as anyone under 21. Kalshi's platform accepts users 18 and older — meaning Connecticut high school seniors who cannot legally place a sports bet with a licensed operator may open Kalshi accounts. DCP Commissioner Cafferelli stated that Kalshi "targets minors and individuals who have purposefully opted out" of state-approved gambling programs, and does not apply technical standards designed to protect consumers.

    Count Four addresses additional Connecticut consumer protection violations arising from how Kalshi described and marketed its products.

    Kalshi's Position: Federal Preemption

    Kalshi — a New York-based company whose exchange subsidiary holds Designated Contract Market and Derivatives Clearing Organization status granted by the Commodity Futures Trading Commission in November 2020 — rejects Connecticut's characterization of its products as sports wagers. The company argues its event contracts are "swaps" under the Commodity Exchange Act, a category of derivatives regulated exclusively by the CFTC, and that state gambling statutes are therefore preempted by federal law.

    Jovy Dedaj, Kalshi's head of litigation, responded to the Connecticut lawsuit on social media, calling it "the latest in a line of arbitrary and inconsistent enforcement by the states." Dedaj pointed out that other prediction market operators continue to operate in Connecticut while only Kalshi faces an injunction effort, and argued that the selective enforcement pattern demonstrates exactly why uniform federal oversight is necessary rather than a state-by-state patchwork.

    DCP Commissioner Cafferelli addressed the disparity directly: "These markets have been waging a coordinated campaign to convince people they are offering investments that are somehow safe when the reality is they are indistinguishable from sports wagering. They target minors and individuals who have purposefully opted out, don't adhere to any of our technical standards designed to protect consumers' money and personal information, and violate all of Connecticut's gaming laws."

    The Connecticut Court Record

    The current lawsuit is the third legal move in a sequence that began nearly nine months ago. In December 2025, Connecticut's Department of Consumer Protection Gaming Division issued cease-and-desist orders to Kalshi and two other prediction market operators, directing them to immediately halt advertising, offering, and promoting sports event contracts to Connecticut residents, and to permit existing Connecticut users to withdraw their funds.

    Kalshi filed its own lawsuit the following day, seeking a preliminary injunction to pause Connecticut's enforcement while the federal preemption question was litigated. That bid was denied on August 7, 2026, by U.S. District Judge Vernon Oliver in KalshiEX LLC v. Cafferelli. Judge Oliver concluded that Kalshi's sports-event contracts function as sports wagers rather than federally protected swaps, and that Connecticut's gambling statutes are not preempted by the Commodity Exchange Act.

    Kalshi has since appealed that ruling to the U.S. Court of Appeals for the Second Circuit. The new civil enforcement lawsuit filed by AG Tong proceeds on a separate track, seeking permanent relief rather than the temporary protection Kalshi sought in its own federal action.

    Connecticut's complaint cites a substantial collection of prior rulings that reached similar conclusions. Courts in Maryland, Nevada, Massachusetts, Washington, Michigan, New York, Ohio, Arizona, and Utah have each rejected Kalshi's federal preemption argument — as has the U.S. Court of Appeals for the Sixth Circuit. That record, spanning ten state and federal jurisdictions plus one federal appellate court, forms the core of Connecticut's argument that the preemption theory has been systematically tested and found wanting.

    Two Tracks, One Legal Question

    Connecticut is notable among the states challenging Kalshi because it is simultaneously fighting on two fronts. The CFTC, defending federal authority over CFTC-regulated derivatives, sued Connecticut along with two other states earlier this year, arguing that those states cannot apply their gambling laws to products listed on CFTC-designated exchanges. Connecticut has moved to dismiss that federal lawsuit.

    Connecticut is therefore simultaneously defending itself against a federal claim that it lacks authority to regulate Kalshi — and exercising that authority through its own civil enforcement action against Kalshi. Both disputes turn on the same central question: whether Kalshi's sports event contracts are swaps under federal commodities law, subject to exclusive CFTC jurisdiction, or sports wagers subject to state regulation.

    No federal circuit court has issued a binding ruling that resolves the preemption dispute nationwide. The Second Circuit, which will hear Kalshi's appeal from Judge Oliver's August 7 ruling, could provide significant clarity — though any ruling remains subject to further appeal. Courts at every level continue to generate conflicting or complementary opinions while the question works its way toward a potential Supreme Court resolution.

    The National Landscape

    Connecticut joins a growing roster of states that have moved beyond regulatory warnings into active litigation. The New York Times reported that 20 states are currently in court over prediction market authority, and that 44 attorneys general signed a joint letter last month describing the platforms as a "new form of casino."

    Key national developments from recent months:

    • A Washington state court issued a preliminary injunction in August 2026 requiring Kalshi to halt sports, election, and other prediction market categories for Washington residents.
    • Baltimore filed a civil lawsuit against Kalshi and Polymarket this month, also naming distribution partners Coinbase, Robinhood, and Webull as defendants.
    • The CFTC issued a notice of proposed rulemaking in June 2026, beginning a formal process to define permissible sports event contracts — the regulatory action the industry has argued should substitute for state enforcement.
    • Kalshi reported $40 billion in trading volume in July 2026, a figure that reflects the platform's growth even as its legal battles multiply.

    What Prediction Market Users in Connecticut Should Know

    Sports prediction markets, including those on Kalshi, remain accessible to Connecticut residents while the new lawsuit works through the courts. No injunction has been issued in the AG's civil action, and Kalshi's appeal of Judge Oliver's August 7 ruling is pending before the Second Circuit. Kalshi itself has noted that other prediction market platforms continue to operate in Connecticut without facing the same enforcement pressure, which may indicate the market environment will remain in flux for some time.

    Users who currently hold funds on covered platforms should be aware that Connecticut's December 2025 cease-and-desist order required all three platforms to allow Connecticut residents to withdraw their balances.

    For real-time odds and cross-platform price tracking on U.S. prediction markets, PredictionMarkets.US aggregates data from the major licensed platforms in one place.

    Frequently Asked Questions

    Is Kalshi legal in Connecticut? Sports prediction markets on Kalshi remain accessible to Connecticut residents while litigation is active. Connecticut has not obtained an injunction in its new civil lawsuit. However, the state's position is that Kalshi's sports event contracts require a state gambling license, and Connecticut has pursued multiple enforcement avenues since December 2025.

    What is Connecticut seeking from the lawsuit? Connecticut is seeking a permanent injunction blocking Kalshi from offering sports event contracts to state residents, disgorgement of all revenue earned from those contracts in Connecticut (or, alternatively, the regulatory fees a licensed operator would have owed), civil penalties, and restitution to affected consumers.

    How does Connecticut's lawsuit compare to other state actions? Connecticut's complaint is notable for explicitly targeting Kalshi's minimum age of 18 against Connecticut's sports betting minimum of 21, and for alleging violations of state consumer protection laws through Kalshi's marketing claims. It also cites a court record of more than ten prior rulings rejecting Kalshi's federal preemption defense — the most comprehensive legal scorecard assembled in any single complaint to date.

    What happens next? Two proceedings run in parallel. Kalshi's appeal of Judge Oliver's preliminary injunction denial is before the Second Circuit Court of Appeals. Connecticut's new civil enforcement action will proceed separately, with the AG seeking permanent relief. The Second Circuit's ruling on preemption could significantly affect the outcome of both.

    Conclusion

    Connecticut's lawsuit adds a new legal front to what has become the defining regulatory battle in the prediction market industry. With 20 states now in active litigation, 44 AGs on record opposing current enforcement gaps, and the federal government simultaneously defending the CFTC's authority in court, the question of who regulates prediction markets is heading toward the federal appellate courts — and potentially beyond.

    Track live prediction market odds, cross-platform pricing, and market availability across all major U.S. platforms at PredictionMarkets.US.

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