Connecticut officials are taking Kalshi’s prediction markets to court in a new lawsuit that accuses the company of operating an illegal gambling platform.
State members are seeking a court injunction that would prohibit the operator from letting consumers buy and sell event contracts it claims are in violation of state laws. This comes just over two weeks after Kalshi was denied a preliminary injunction that would’ve prevented Connecticut officials from pursuing gaming enforcement actions.
Connecticut targets Kalshi’s prediction markets
Kalshi and other prediction market operators routinely argue that their event contracts allow users to compete in a peer-to-peer, open-market system. Contracts settle based on the accuracy of the user’s prediction, which they make when spending money to acquire positions.
Prediction markets are available for a plethora of industries, including sports, politics, finance, and entertainment, among others. Sports have proven to be the most popular, driving approximately 80% of the total trading volume reported by various operators.
Connecticut officials believe that sports prediction markets — which can settle based on the winner of a match or game, the performance of a particular player, or something as inconsequential as what words were used by a commentator — clearly violate local gaming laws.
“Sports event contracts are no different than sports betting and are not magically shielded by federal law from Connecticut’s commonsense consumer protection laws,” said Attorney General William Tong. “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.”
Gov. Ned Lamont (D) co-announced the lawsuit alongside Department of Consumer Protection Commissioner Bryon Cafferelli and Tong on Tuesday.
Lamont noted that the state’s decision to legalize sports betting was intended to create a regulated gaming industry, which is presently being undermined by the lack of regulations faced by prediction operators.
“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,” he said.
Unfair treatment?
Connecticut’s complaint only named Kalshi and not other prediction market operators, such as Robinhood, Underdog, Polymarket, or a plethora of competitors.
The inconsistency in the state’s approach was highlighted by Kalshi’s Head of Litigation Jovy Dedaj in a post on X (Twitter). He noted the contradictory approach and claimed it was further proof that prediction markets should be regulated federally by the Commodity Futures Trading Commission, and not by states, including Connecticut.
“Connecticut just filed this lawsuit to shutdown Kalshi immediately, but they're okay with other prediction markets operating there in the meantime,” Dedaj wrote. “This is the latest in a line of arbitrary and inconsistent enforcement by the states, which shows this has nothing to do with consumer protection.
“If it did, the states would be seeking the same relief across the board. This unequal treatment is exactly why federal oversight is necessary.”
The dispute between Connecticut and Kalshi’s prediction markets has been growing since last year. In Dec. 2025, the Department of Consumer Protection Gaming Division sent cease-and-desist orders to Kalshi and two of its competitors, commanding they stop offering sports event contracts.
Kalshi responded with the preliminary injunction that was eventually denied by a U.S. district judge earlier this month. The decision was appealed to the Second Circuit Court of Appeals.
The Trade Handle Prediction Markets Take
Kalshi’s inability to procure a preliminary injunction left the door open for Connecticut to apply gaming enforcement against prediction markets. The situation is still developing, but it adds to a series of recent legal outcomes that favored state enforcement agencies after prediction markets had largely controlled the legal playing field. Four states — Massachusetts, Michigan, Nevada and Washington — have prediction market restrictions in place, and that list is slowly growing.