Kalshi Takes Connecticut Prediction Market Dispute to Second Circuit

HARTFORD, Conn. – Kalshi has asked the Second Circuit to stop Connecticut from enforcing state gambling laws against its sports event contracts during an appeal.

The emergency request could determine whether more than 24,000 Connecticut users can continue trading sports contracts while the federal-state jurisdiction dispute proceeds.

Kalshi filed the motion Monday after U.S. District Judge Vernon D. Oliver denied its request for a preliminary injunction on Aug. 10. Connecticut opposed the appellate request Tuesday and asked for until Aug. 24 to submit a full response.

Kalshi Seeks Emergency Protection From State Enforcement

The prediction market operator argues that the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive jurisdiction over contracts traded on federally designated contract markets. Kalshi says allowing individual states to regulate the same products under gambling laws would create conflicting requirements across the country.

“If Connecticut could use its gambling laws to regulate instruments traded on federally designated exchanges, so could 49 other states,” Kalshi said in its filing, warning that the result would be “total chaos”. The company told the court it has more than 24,000 Connecticut users with millions of dollars in open positions and could suffer lost business and reputational harm if state enforcement proceeds.

Kalshi first asked Oliver to protect it while the appeal moves forward, but the judge denied an emergency injunction on Aug. 15. He concluded that the company had not made the stronger showing of likely success required for relief pending appeal.

Judge Says Sports Contracts Are Not Federal Swaps

Oliver’s underlying 38-page ruling found that Kalshi’s sports event contracts do not qualify as “swaps” under the Commodity Exchange Act and therefore are not subject to the CFTC’s exclusive jurisdiction on that basis. He also rejected Kalshi’s argument that federal law preempts Connecticut’s traditional authority to regulate sports wagering.

“Kalshi characterizes its sports-related event contracts in various ways, but at bottom, they are sports wagers”, Oliver wrote. The judge also found that Kalshi had not established irreparable harm, noting that the company continued offering and promoting the contracts despite being aware of possible state enforcement.

Kalshi cited the CFTC’s recent emergency intervention in New York when it returned to Oliver seeking protection during the appeal. The judge was not persuaded, ruling that an administrative agency cannot dictate an interpretation of federal law that conflicts with a court’s independent reading of the statute.

Connecticut Fight Dates Back to December

The dispute began in December 2025 when the Connecticut Department of Consumer Protection ordered Kalshi, Robinhood Derivatives and Crypto.com to stop offering what the state described as unlicensed sports wagering. Regulators also raised concerns about access for people under 21 and customers on Connecticut’s voluntary self-exclusion list.

Federal courts have since reached conflicting conclusions over whether states can apply gambling laws to Kalshi’s sports contracts. The Third Circuit sided with Kalshi in its New Jersey dispute in April, while other federal courts have allowed state regulation to proceed, leaving the issue unsettled across jurisdictions.

The CFTC has separately sued Connecticut over the same jurisdictional conflict, arguing that the state is intruding on federal oversight of designated contract markets. Kalshi’s immediate request is now before the Second Circuit in case 26-2239, with Connecticut opposing an injunction while the broader appeal proceeds.

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