Kalshi Secures Temporary Block On Connecticut Order Halting Sports-Event Contracts

A federal judge has granted Kalshi a temporary stay against enforcement by Connecticut Department of Consumer Protection, pausing a directive that ordered Kalshi - along with Robinhood Derivatives and Crypto. com - to stop offering sports-event contracts to residents. The move underscores the intensifying legal battle between state regulators framing such contracts as illegal gambling and the platform's claim that its products fall under federal derivatives regulation by Commodity Futures Trading Commission.

The DCP's cease-and-desist letters, issued on 2 December, asserted that the three platforms lacked the licencing required for sports wagering and that their“sports event contracts” constituted unlicensed online gambling under Connecticut law. Regulators flagged multiple concerns including the absence of consumer protections, failure to implement age verification, and contracts that could allow insider betting or wagers on events with known outcomes.

Kalshi responded within 24 hours by filing a lawsuit in federal court and seeking an injunction. The company argued that the DCP's action violated the federal regulatory framework established under the Commodity Exchange Act - a framework under which Kalshi classifies itself as a“designated contract market” and contends its event-based products are subject solely to CFTC oversight.

The judge's decision reflects judicial receptivity to that argument, at least provisionally. The injunction pauses state enforcement while the broader legal challenge plays out, allowing Kalshi to continue servicing Connecticut users - for now.

Legal uncertainty already looms from other jurisdictions. Only last month, a federal judge in Nevada ruled that Kalshi must comply with state gaming laws when offering sports-based contracts to customers there. The ruling rejected the company's claim of exclusive federal jurisdiction, interpreting the Commodity Exchange Act and congressional intent to preserve state and tribal authority over gambling regulation.

States including Massachusetts, New York, Maryland and New Jersey are also pursuing enforcement actions or lawsuits against Kalshi. In Massachusetts, the state's attorney general has sought an injunction against the platform, citing it as an unlicensed gambling operation.

Kalshi's leadership - including CEO Tarek Mansour - maintains that the firm is building a federally regulated marketplace for trading event-based contracts. Kalshi's view is that classification as derivatives shields it from state gambling statutes.

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