Connecticut Judge Sides with State in Kalshi Sports Betting Fight

A federal judge in Connecticut has ruled that state regulators can enforce sports betting rules against Kalshi, dealing a setback to the prediction market platform's efforts to operate free of state gambling oversight. 

Judge Vernon Oliver denied Kalshi's request to stop the state's Department of Consumer Protection from applying its gambling laws to the company's sports-related contracts.

In his decision issued on Monday, Oliver wrote that he doubted Kalshi could convince a court that Connecticut lacks authority over its sports markets. The ruling is narrow in scope and does not extend to Kalshi's other offerings, such as contracts tied to elections or news events.

Kalshi has argued that its sports contracts function more like financial derivatives than traditional wagers. It has repeatedly pointed to the Commodity Futures Trading Commission's (CFTC) jurisdiction over such products. 

But Oliver rejected that framing, concluding that game outcomes do not qualify as the kind of event with financial impact that derivatives law requires. He wrote that regardless of how Kalshi labels its sports contracts, they amount to sports wagers in practice.

Connecticut currently caps sports betting at three licensed operators, each partnered with the state lottery or one of two tribal casinos, and all three slots are filled. That means Kalshi cannot legally operate in the state without a change to the existing law.

Kalshi has already filed notice of its intent to appeal. State lawmakers, meanwhile, say they are weighing additional rules to address Kalshi markets beyond sports, citing consumer-protection concerns as prediction market apps expand nationally.

Federal regulator pushes back against states

Connecticut is far from the only battleground. Days before Oliver's ruling, the CFTC moved to keep Kalshi running in New York, using emergency authority to counter a lawsuit filed by state Attorney General Letitia James in late July.

CFTC Chairman Mike Selig argued that Congress never intended derivatives exchanges to answer to a mix of state gambling statutes, describing Kalshi's contracts as interstate financial instruments that match trades between residents of different states through a backstopped clearinghouse. 

“New York intends to make event contract derivatives waste away under its iron curtain of state gaming laws before the courts get the chance to issue final rulings,” he said in a statement. “New York has no business regulating these interstate financial markets. The Commission is required by law to ensure order in these markets, and that is what we have done today,” he furthered. 

New York's lawsuit followed a July 8 federal court ruling that rejected Kalshi's attempt to block the state from suing in the first place. 

The state's complaint accuses Kalshi of skipping the licensing process required by the New York State Gaming Commission. Kalshi has since asked to move the case to federal court, while New York has asked to send it back, with a ruling on that dispute still pending.