Connecticut’s new lawsuit against Kalshi piles on to prediction market legal fight
The courtroom combat across state and federal courts is so far producing roughly split outcomes, suggesting a big job may be coming for the Supreme Court.
— Connecticut’s lawsuit seeking to halt Kalshi betting is just the latest of many, leaving the courts awash with cases.
— Judges’ decisions and rhetoric have been widely mixed, underlining the contention of legal experts that the U.S. Supreme Court could eventually have to weigh in.
Nearly half of the states in the U.S. have picked a legal fight that poses an existential challenge to the prediction markets, with a new lawsuit from Connecticut adding to the mix.
So far, local and federal courts have produced a mixed bag of decisions on halting platforms such as Kalshi, a leading name in the U.S. That company is often in the middle of the legal fights, and it said in an online posting on Thursday that the result of its battles so far «is currently close to 50-50.»
Connecticut had already been in a dispute with Kalshi since late last year, when the New England state ordered the company to shut down its sports betting, asserting that the activity violated the state’s gambling regulations. Kalshi sued Connecticut to try to stop the order and initially lost, though the firm appealed to the Second Circuit Court of Appeals.
The Commodity Futures Trading Commission also sued Connecticut (and other states) for their prediction market interventions, claiming that the states have no say over the activities of a federally regulated trading platform.
As of Wednesday, Connecticut has formally sued Kalshi back, asking the court to implement the order to halt the firm’s sports betting there.
“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 state Attorney General William Tong in a statement. «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.”
For its part, Kalshi is making a case against Connecticut similar to what it recently argued about Washington state, that they’re picking on Kalshi while leaving similar platforms alone.
«Connecticut just filed this lawsuit to shutdown Kalshi immediately, but they’re okay with other prediction markets operating there in the meantime,» said Jovy Dedaj, Kalshi’s head of litigation, in a posting on social media site X. «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.»
In April, the Third Circuit Court of Appeals stopped New Jersey from banning Kalshi, and a federal judge halted Arizona’s pursuit of criminal charges against the company. But in other states, Kalshi has had to cut off customer access in some states while it and the CFTC continue to make their case.
«Even the courts that rule against Kalshi do not all agree; many have different legal bases for their findings,» the company noted.
The wide range of court actions is a recipe for U.S. Supreme Court resolution, though the high court hasn’t yet taken it up. The legal experts in this arena and the CFTC itself have suggested the state-federal rift and the mess of court decisions will force the Supreme Court’s hand soon.
The CFTC had once been on the other side of this argument, battling the legality of event contracts platforms. That stance reversed dramatically when President Donald Trump appointed a new chief of the agency, Mike Selig, who has become the industry’s legal champion. Selig (and Trump himself) are fans of the sector, which is seeing explosive growth.
Selig has begun pursuing formal rulemaking for the industry to institute bespoke regulations at the federal level, but the states aren’t backing down from their position that the event contracts are — in practice — indistinguishable from gambling.
Kalshi’s Dedaj underlined the inconsistent actions from the states, arguing that their «unequal treatment is exactly why federal oversight is necessary.»
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