US Judge Grants Kalshi Temporary Reprieve in Connecticut Gambling Enforcement Dispute

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 platforms 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 QuestionsWhat 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 states 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 CFTCs 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: Kalshis $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.