Connecticut Federal Court Denies Kalshi’s Preliminary Injunction Motion Against State Gambling Regulators

A federal judge has dealt Kalshi another setback in its nationwide legal fight to keep offering sports event contracts, denying the prediction market operator’s request for a preliminary injunction against Connecticut regulators. U.S. District Court Judge Vernon D. Oliver ruled that Kalshi’s sports-event contracts do not meet the statutory definition of a “swap” under the Commodity Exchange Act (CEA), a finding that clears the way for the state to enforce its gambling laws against the company.

The ruling is the latest blow in a monthslong legal battle that began in December 2025, when Connecticut’s Department of Consumer Protection (DCP) issued cease-and-desist letters to Kalshi, Robinhood, and Crypto.com over their sports-related prediction contracts. Kalshi sued the DCP and its Gaming Division director, Kristofer Gilman, the very next day, seeking both a preliminary and permanent injunction to block the state from treating its contracts as unlicensed sports wagering.

Why the Court Sided With Connecticut

At the center of the case is a jurisdictional question that has followed Kalshi from state to state: does the CFTC’s oversight of derivatives markets preempt states from regulating sports-outcome contracts as gambling? Judge Oliver said no, at least for now. In his order, he wrote that Kalshi’s sports-event contracts “fail to satisfy this portion of the statutory definition of a swap because they do not depend on whether an underlying sporting event occurs, fails to occur, or occurs to a particular extent.” Instead, he found, the contracts hinge on “the event’s outcomes or discrete in-game occurrences” — a distinction that matters because the CEA’s swap definition is written around whether an event happens at all, not which of several outcomes results.

Oliver went further, ruling that even if the contracts were properly classified as swaps, Connecticut’s gambling statutes still would not be preempted by federal law. He noted that the CFTC “has not historically regulated sports wagering and has not exercised meaningful oversight over Kalshi’s sports event contracts,” undercutting Kalshi’s argument that Congress intended to hand the agency exclusive authority over this corner of the derivatives market. The judge also found that Kalshi had not shown it was likely to succeed on the merits or that it would suffer irreparable harm without the injunction — two of the standard requirements for winning preliminary relief.

Part of a Broader Pattern for Prediction Markets

Connecticut’s cease-and-desist campaign didn’t stop at Kalshi. Coinbase, which also offers sports-outcome trading, was hit with a similar order and lost its own bid for a preliminary injunction in a separate ruling issued by Judge Oliver the same day. The DCP’s original December notices argued that platforms offering sports event contracts were functioning as unlicensed sportsbooks under Connecticut law, exposing users to wagers with none of the state’s consumer protections — including, the department noted, no safeguards preventing bettors under 21 from participating.

The Connecticut decision adds to a mixed record for Kalshi as it presses similar arguments across the country. The company previously won a preliminary injunction in New Jersey, where a federal court found its contracts were likely covered by the CFTC’s exclusive jurisdiction. But Kalshi has hit setbacks elsewhere too, with courts in multiple states declining to block enforcement actions in recent weeks. A Kalshi spokesperson said the company “respectfully disagree[s] with the Court’s decision” in Connecticut and is “considering all legal options” moving forward, signaling the fight is likely headed to appeal rather than settling here.

What Happens Next

The ruling does not automatically shut Kalshi out of Connecticut — it simply removes the legal barrier that had prevented the DCP from pursuing enforcement while the underlying case played out. Connecticut regulators can now move to enforce cease-and-desist orders against the company, though the broader lawsuit over whether state gambling law is preempted by federal derivatives law remains unresolved. The CFTC itself has also sued Connecticut directly over its enforcement approach, a separate case still pending in federal court, and Kalshi’s attorney has suggested he expects Judge Oliver to eventually grant the state’s motion to dismiss that CFTC case as well.

For bettors and traders following the broader prediction markets space, the Connecticut ruling underscores just how unsettled the regulatory landscape remains. States are increasingly pushing back against sports-outcome contracts as a workaround for traditional sports betting licensing, and courts so far have been split on whether federal commodities law shields platforms like Kalshi from that scrutiny. Anyone weighing whether to use a Kalshi promo code or any other prediction market for sports outcomes should factor in that legal status can vary sharply by state and remains subject to change as more of these cases work through the courts.