Connecticut takes Kalshi to court over sports bets

• Attorney General William Tong filed the complaint in Hartford Superior Court on August 26; Kalshi removed the case to federal court the same day.
• The suit seeks an injunction, civil penalties, disgorgement and restitution over Kalshi’s sports event contracts.
• It follows a federal court’s denial of Kalshi’s bid to block Connecticut’s enforcement action.

Connecticut has sued Kalshi, seeking a court injunction to stop the prediction market operator from offering what state officials call unlicensed sports wagers.

Tong filed the civil complaint in Hartford Superior Court, but Kalshi moved the case to federal court the same day, continuing a pattern the company has used in similar disputes elsewhere.

Tong lays out the case

Attorney General William Tong, Department of Consumer Protection Commissioner Bryan Cafferelli and Governor Ned Lamont announced the lawsuit on August 26. It asks the court to permanently bar KalshiEX from offering sports wagering in the state without a license, and to award civil penalties, disgorgement and restitution.

The complaint centers on Kalshi’s sports event contracts, which let users trade on outcomes including which team or player wins, final scores, point spreads, league standings and individual player statistics. It also cites Kalshi’s parlay-style “combo” products, arguing they function like the sports bets already regulated under state law.

Connecticut restricts sports wagering to a small number of licensed operators overseen by the Department of Consumer Protection, and the state says Kalshi has never applied for that license.

Motivating the decision, AG William Tong said:

“Sports event contracts are no different than sports betting and are not magically shielded by federal law from Connecticut’s commonsense consumer protection laws,” Tong wrote.

“These laws exist for a reason—to protect minors, to prevent problem gambling, to ensure your money is safe and your personal information is protected. None of that is happening now on Kalshi, and we’re suing to put a stop to it.”

The filing raises concerns familiar from Kalshi’s other state disputes. It alleges the platform lets users as young as 18 trade sports contracts, below Connecticut’s licensed wagering age floor of 21. It also flags gaps in self-exclusion enforcement, deposit limits and integrity monitoring that licensed sportsbooks must meet.

Governor Ned Lamont commented:

“When we legalized sports wagering in 2021, the goal was to create a safe, responsibly regulated market for Connecticut consumers, not to open a free-for-all on sports betting,” Lamont added.

“We did this in coordination with our tribal partners, recognizing the importance of our government-to-government relationship and acknowledging tribal sovereignty in gaming operations, something we have honored for more than three decades.”

Kalshi cries foul

Kalshi’s head of litigation, Jovy Dedaj, wrote on X that Connecticut’s move was the latest in “a line of arbitrary and inconsistent enforcement,” noting the state is “okay with other prediction markets operating there in the meantime.”

“This unequal treatment is exactly why federal oversight is necessary,” Dedaj said.

Kalshi has long argued that its status as a CFTC-registered exchange places its contracts under exclusive federal jurisdiction, preempting state gambling law. The company sued Connecticut officials last December, a day after the state’s Gaming Division sent cease-and-desist orders to Kalshi, Robinhood and Crypto.com.

That earlier case did not go Kalshi’s way. Earlier this month, US District Judge Vernon Oliver denied the company’s motion for a preliminary injunction against state enforcement, clearing the path for Tong’s civil suit. Kalshi has since appealed to the Second Circuit.

A split verdict across courts

Connecticut is one of more than a dozen states now pursuing enforcement action against Kalshi’s sports contracts.

The complaint cites rulings against the company in Maryland, Nevada, Massachusetts, Washington, Michigan, New York, Ohio, Arizona and Utah, along with the Sixth Circuit Court of Appeals, as evidence its contracts are not shielded as federally regulated swaps.

The record is not one-sided. The Third Circuit ruled for Kalshi in April, affirming a preliminary injunction against New Jersey and finding its sports contracts do qualify as swaps under federal law. A federal judge in Tennessee reached a similar conclusion, granting Kalshi its own preliminary injunction there. The split has left lower courts divided on the core legal question, with appeals still pending in several circuits.

In Nevada, where Kalshi agreed in July to geofence the state by an August 12 deadline, regulators now say the company missed that cutoff. The Nevada Gaming Control Board is seeking $120,000 in daily fines, alleging investigators were still able to buy restricted contracts from inside the state after the deadline passed. Kalshi disputes the finding and says the transactions involved an outdated version of its app.

New York has taken similar action to Connecticut. Attorney General Letitia James sued Kalshi after courts there also declined to grant the company an injunction, and Ohio regulators moved to fine the platform $5 million over similar conduct.

The CFTC has backed Kalshi institutionally, filing preemption suits against nine states including Connecticut. In July, 44 state attorneys general told the agency in a comment letter that it lacks authority over sports prediction markets.

Connecticut’s complaint notes that sports event contracts made up between 80% and 90% of Kalshi’s offerings as of February.

The state uses that figure to argue the platform operates as a sportsbook rather than a general derivatives exchange. With federal appeals courts now split on the central question, the Hartford case adds another data point toward a fight that looks increasingly likely to end up before the Supreme Court.