A federal judge in Connecticut has refused to block state regulators from taking action against Kalshi, ruling that the prediction market operator is unlikely to prove that its sports contracts qualify as federally protected swaps.
US District Judge Vernon D. Oliver denied Kalshi’s request for a preliminary injunction against the Connecticut Department of Consumer Protection (DCP) and other state officials. The decision leaves Connecticut free to enforce its gambling laws while the broader legal dispute continues.
The case centres on Kalshi’s argument that its sports event contracts fall under the Commodity Exchange Act (CEA) and are therefore subject exclusively to Commodity Futures Trading Commission oversight. Connecticut maintains that the products are effectively sports wagers and require state gambling authorisation.
Court rejects Kalshi’s swap argument
Oliver concluded that Kalshi had not shown a likelihood of success on its claim that sports event contracts meet the CEA definition of swaps.
The judge distinguished between a sporting event itself and the possible results arising from it. Under that interpretation, the occurrence of a football match, boxing contest or horse race is the relevant event, while the winner or an in-game result is an outcome rather than a separate event covered by the statutory language Kalshi relied upon.
The court also found that the contracts did not meet another part of the swap definition requiring an association with a potential financial, economic or commercial consequence.
Kalshi’s second major argument — that federal commodities law overrides Connecticut’s gambling framework — was also rejected. Oliver determined that the structure of the CEA does not demonstrate congressional intent to remove state authority over gambling regulation in circumstances such as these.
The ruling further found that Connecticut’s requirements can operate alongside federal CFTC regulation rather than creating an unavoidable legal conflict.
Connecticut enforcement remains in place
The dispute dates back to December 2025, when Connecticut’s DCP issued cease-and-desist orders to Kalshi, Robinhood Derivatives and Crypto.com over what the regulator classified as unlicensed online sports wagering.
Connecticut said the companies were not licensed to provide sports betting in the state and raised concerns including under-21 participation, consumer protection standards, insider wagering and advertising to self-excluded individuals. The regulator ordered the platforms to stop making sports event contracts and other unlicensed gambling products available to Connecticut residents.
Kalshi subsequently sought federal court protection from enforcement, arguing that its status as a CFTC-regulated designated contract market placed the products beyond Connecticut’s gambling jurisdiction.
Oliver also rejected the idea that Kalshi’s ability to self-certify contracts amounts to federal approval of their legality. The court noted that the CFTC had not individually reviewed Kalshi’s sports contracts under the CEA provision dealing with gaming-related products.
According to information cited in the ruling, sports-related contracts represented approximately 80% to 90% of Kalshi’s listings and revenue around the time of a February hearing, highlighting the commercial significance of the dispute for the company.
The CFTC has taken the opposite broader position in other prediction-market cases. Earlier in 2026, the federal regulator said event contracts traded on registered exchanges fall within its exclusive jurisdiction and argued that state attempts to impose separate rules could interfere with the federal derivatives framework.
The Connecticut decision therefore adds another ruling to an increasingly divided US legal landscape over whether sports prediction contracts should primarily be treated as federally regulated financial products or as gambling subject to state licensing and oversight.