Judge Grants Kalshi Temporary Relief in Betting Dispute
Early this month, Connecticut regulators targeted KalshiEX LLC, Robinhood Derivatives, and Crypto.com, accusing them of operating unauthorized gambling platforms.
The state’s Department of Consumer Protection stated that the sports betting contracts offered by these companies violated state laws and demanded an immediate halt to their betting services. However, a federal judge has now provided Kalshi with temporary legal protection.
The Prediction Market Pushes Back
Regulators ordered the firms, including Kalshi, to enable Connecticut users to withdraw their funds and warned that non-compliance could result in civil penalties or criminal charges.
Commissioner Bryan T. Cafferelli clarified that only licensed operators are permitted to offer sports betting in Connecticut, stressing that none of the targeted companies hold such a license.
Regulatory authorities expressed concerns that without proper supervision, bettors could face risks such as manipulated wagers, contested payouts, and marketing targeted at minors or excluded individuals.
In response, Kalshi promptly filed a lawsuit challenging the state’s order. The company contends that its event-based contracts are regulated by the federal Commodity Exchange Act, rather than state gambling laws, placing oversight authority with the Commodity Futures Trading Commission instead of Connecticut regulators.
Federal Judge Grants Kalshi Temporary Respite
Federal Judge Verson Oliver has granted Kalshi temporary relief by instructing the state to pause enforcement actions against the company while the legal case proceeds.
Connecticut is required to submit its initial legal response by January 9, 2026, with additional filings expected later that month. Oral arguments are planned for mid-February.
Connecticut is among several states challenging Kalshi’s operations. Kalshi’s defense relies heavily on claims of federal preemption, referencing the Dodd-Frank Act and arguing that state authorities lack jurisdiction over its platform.
In Massachusetts, regulators are seeking to stop Kalshi from operating due to a lack of licensing. Judge Christopher Barry-Smith has questioned whether financial market protections should apply to sports betting, while state attorneys maintain that federal laws were not designed to regulate recreational betting.
Additionally, a federal judge in Nevada ruled against Kalshi, determining that sports outcomes do not constitute valid “events” under commodities law. This ruling affirmed that Kalshi’s offerings are subject to state gambling regulations and has prompted similar legal actions in six other states.
