US Judge Grants Kalshi Temporary Reprieve in Connecticut Gambling Enforcement Dispute

• Kalshi received a temporary stop to Connecticut’s enforcement after the state issued a cease and desist on December 2, 2025, for alleged unlicensed sports wagering.

• The platform argues its event contracts fall under exclusive CFTC jurisdiction, not state gambling laws.

• Kalshi’s trading volume hit a record $4.54 billion in November 2025, amid growing popularity and a $1 billion funding round valuing it at $11 billion.

Kalshi secures temporary win in Connecticut ruling against DCP’s cease and desist for prediction markets. Explore how federal law protects platforms like Kalshi from state interference. Stay updated on regulatory battles in crypto-adjacent markets.

What is the Kalshi Connecticut Ruling?

The Kalshi Connecticut ruling involves a US federal judge’s decision on December 16, 2025, to temporarily halt enforcement by the Connecticut Department of Consumer Protection (DCP) against the prediction market platform Kalshi. This action came after the DCP issued a cease and desist order on December 2, 2025, accusing Kalshi, alongside Robinhood and Crypto.com, of conducting unlicensed online gambling, specifically sports wagering through event contracts. The judge’s order requires the DCP to refrain from further actions while the court reviews Kalshi’s motion for a preliminary injunction, highlighting the tension between state gambling regulations and federal commodities oversight.

How Has Kalshi Responded to State Regulatory Challenges?

Kalshi, a federally regulated designated contract market under the CFTC, has actively defended its operations against multiple state regulators. In the Connecticut case, the company filed a lawsuit on December 3, 2025, asserting that its event contracts—allowing trades on outcomes like sports and politics—are lawful under federal law and fall exclusively under CFTC jurisdiction. Court documents from the US District Court in Connecticut detail Kalshi’s argument that state interference violates federal commodities regulations, with Judge Vernon Oliver ordering the DCP to respond by January 9, 2026, and scheduling oral arguments for mid-February 2026.

An excerpt from Kalshi’s preliminary injunction motion arguing that the DCP’s action violates federal commodities laws. Source: CourtListener

Beyond Connecticut, Kalshi has pursued legal action in several states. For instance, in October 2025, it sued the New York State Gaming Commission following a cease and desist order claiming unlicensed sports wagering. Similarly, in September 2025, Massachusetts’ state attorney general initiated a lawsuit against Kalshi, which the platform sought to dismiss. This year alone, Kalshi has filed suits against regulators in New Jersey, Nevada, Maryland, and Ohio, each time alleging regulatory overreach into federally protected activities. These cases illustrate a broader pattern where state authorities attempt to apply gambling laws to federally approved prediction markets, according to legal filings reviewed in federal courts.

The platform’s growth has fueled these disputes. Kalshi launched national event contracts in January 2025, leading to a surge in popularity with a record $4.54 billion in monthly trading volume in November 2025. This momentum attracted significant investment, including a $1 billion funding round earlier in December 2025 that valued the company at $11 billion. Industry experts, such as those cited in CFTC regulatory discussions, note that prediction markets like Kalshi operate on principles similar to futures trading, distinguishing them from traditional gambling by allowing hedging and speculation on real-world events.

Frequently Asked Questions

What triggered the Connecticut cease and desist order against Kalshi?

The Connecticut Department of Consumer Protection issued the cease and desist order on December 2, 2025, targeting Kalshi, Robinhood, and Crypto.com for allegedly offering unlicensed online gambling, particularly sports wagering via event contracts. This action reflects the state’s effort to enforce local gambling laws on platforms operating under federal commodity regulations.

Why is Kalshi considered a prediction market platform?

Kalshi functions as a prediction market by enabling users to trade contracts on event outcomes, such as election results or sports events, without traditional wagering elements. Regulated by the CFTC as a designated contract market, it provides a structured environment for informed speculation, with trades settling based on verifiable results, making it distinct from unregulated betting sites.

Key Takeaways

• Federal Preemption in Prediction Markets: The Kalshi Connecticut ruling reinforces CFTC’s exclusive jurisdiction over event contracts, potentially limiting state gambling enforcement.
• Growing Platform Scrutiny: With $4.54 billion in November 2025 trading volume, Kalshi faces multiple state lawsuits, highlighting regulatory fragmentation in the US.
• Investment and Expansion: Kalshi’s $11 billion valuation post-$1 billion funding signals strong market confidence, encouraging users to monitor ongoing legal developments for opportunities in compliant trading.

Conclusion

The Kalshi Connecticut ruling marks a pivotal moment in the ongoing debate over prediction market regulation, balancing state gambling concerns against federal commodities authority under the CFTC. As Kalshi navigates lawsuits in Connecticut, New York, Massachusetts, and beyond, this temporary injunction could set precedents for similar platforms in crypto-adjacent spaces. Investors and traders should watch for mid-February 2026 arguments, which may clarify the boundaries of state versus federal oversight and foster greater innovation in regulated event trading.