Connecticut judge rejects Kalshi injunction against state sports betting enforcement challenge

A federal judge has handed Connecticut regulators an early victory in their fight with prediction market operator Kalshi, refusing to stop the state from enforcing its gambling laws while the lawsuit moves forward.

U.S. District Judge Vernon D. Oliver denied Kalshi’s request for a preliminary injunction in an August 10 memorandum and order. The company had asked the U.S. District Court for the District of Connecticut to prevent the Connecticut Department of Consumer Protection and other state officials from enforcing gaming laws against its sports-event contracts before the case is resolved. It has since appealed the Connecticut federal district court’s denial.

Connecticut judge rejects Kalshi federal preemption arguments as it called for injunction

Kalshi maintains that its event contracts fall under the Commodity Exchange Act and are regulated exclusively by the Commodity Futures Trading Commission, arguing that federal law overrides Connecticut’s licensing requirements. Judge Oliver concluded that Kalshi failed to show it was likely to succeed on the key legal questions needed to justify emergency relief, leaving state regulators free to continue enforcing their position.

The dispute traces back to Kalshi’s expansion into sports prediction markets. Although the CFTC designated Kalshi as a contract market in 2020, the company did not begin offering sports-related contracts until January 2025. Those markets let users trade on outcomes involving game winners, point spreads, total scores and individual player performances.

By the February 11, 2026 hearing, those sports contracts represented between 80% and 90% of both Kalshi’s listed contracts and company revenue, according to the court. Kalshi’s valuation stood at roughly $11 billion.

Connecticut regulators first moved against the company in December 2025, sending Kalshi a cease-and-desist letter alleging it was conducting unlicensed online gambling through sports wagering. The Department of Consumer Protection also issued similar notices to Robinhood and Crypto.com over comparable offerings.

At the time, DCP Commissioner Bryan T. Cafferelli said, “Only licensed entities may offer sports wagering in the state of Connecticut. None of these entities possesses a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”

Kalshi responded by suing the department, arguing Connecticut was intruding on the federal government’s exclusive authority to regulate exchange-traded derivatives overseen by the CFTC.

Judge Oliver ultimately agreed with Connecticut that Kalshi had not shown its sports-event contracts likely qualify as swaps under the Commodity Exchange Act or that federal law preempts state gambling laws.

The opinion also relied on the Supreme Court’s “elephants in mouseholes” doctrine, prompting gaming attorney Daniel Wallach to note that Connecticut became the third federal court, after decisions in Ohio and Michigan, to apply that reasoning against sports prediction markets. Wallach added that the litigation now appears to be approaching a case that could test the Supreme Court’s major questions doctrine.

The ruling comes as Connecticut lawmakers continue weighing oversight. Governor Ned Lamont’s proposed Bill No. 5038 would establish age-verification rules, advertising restrictions, enforcement provisions and consumer protections for prediction market platforms while requiring a statewide study of their effects on gambling and state wagering revenue. However, it has since died in committee.

Featured image: Kalshi / Canva

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