Connecticut Sues Kalshi, Calls Its Sports Contracts Illegal Betting
Connecticut has become the latest state to sue Kalshi, arguing in a lawsuit filed August 27 that the prediction market's yes-or-no sports event contracts amount to illegal, unlicensed sports betting under state law. The suit was brought by Attorney General William Tong alongside Governor Ned Lamont and Department of Consumer Protection Commissioner Bryan Cafferelli, and seeks an injunction to stop Kalshi from offering sports event contracts to Connecticut residents.
What the state is arguing
Connecticut's complaint says Kalshi's sports contracts function the same way a traditional sports bet does — a customer risks money on a binary outcome tied to a real game — without the licensing, consumer-protection safeguards, or oversight that the state requires of regulated sportsbooks. The suit specifically points to a lack of protections around underage access, problem-gambling tools, and secure handling of customer funds. In a public statement, Tong said sports event contracts "are no different than sports betting and are not magically shielded by federal law."
Part of a much bigger fight
Connecticut is not acting alone. Roughly 20 states now have active legal disputes with Kalshi over whether its sports-related contracts should be regulated as commodities trading, which falls under federal Commodity Futures Trading Commission oversight, or as gambling, which is a matter of state law. Kalshi has generally argued the former, while state regulators — backed in several cases by rulings against the company — have pushed back. Earlier in August, a federal court rejected Kalshi's bid for a preliminary injunction that would have blocked a similar state action, declining to accept the company's argument that the Commodity Exchange Act gives federal regulators exclusive jurisdiction over its markets. The CFTC itself has taken the opposite side in multiple related cases, suing to defend its regulatory authority against at least nine states.
Why it matters to bettors
The outcome of this wave of litigation will help determine whether prediction markets like Kalshi and Polymarket continue operating in states where traditional sports betting is tightly regulated or unavailable, or whether they get pushed out entirely pending a broader federal resolution. For now, Connecticut residents can expect the fight to play out in court rather than result in an immediate service change, but the case adds to a growing body of state-level rulings that will likely shape how — or whether — sports event contracts keep operating nationwide.