Saga Continues: Connecticut Sues Kalshi Over Alleged Unlicensed Sports Betting

The state of Connecticut has sued prediction market platform Kalshi, in an attempt to prevent the company from offering what state officials call unlicensed sports betting. The lawsuit was announced officially by Connecticut attorney general William Tong, governor Ned Lamont, and Department of Consumer Protection commissioner Bryan T. Cafferelli. The state is, therefore, seeking a court injunction to prevent the platform from offering sports event contracts in Connecticut. State: Kalshi’s Contracts Are a Form of Gambling Kalshi operates an online event contract platform where users can take positions on whether future events will occur. However, Connecticut officials argue that some of its sports-related contracts closely resemble conventional sports wagers. According to the Attorney General’s Office, the contracts cover outcomes including whether a team or player will win a sporting event or series, as well as other events including the number of wins a team records during a season, the team’s ranking in the league, points scored, point spreads, or individual player statistics. The state maintains that all these products actually represent gambling and should, accordingly, comply with Connecticut’s gaming laws. “Sports event contracts are no different than sports betting,” Attorney General William Tong said, arguing that federal oversight does not prevent Connecticut from enforcing its consumer protection laws. The state says its concerns include protections for minors, people affected by problem gambling, consumer funds and personal information. Dispute Over State and Federal Oversight The latest lawsuit is part of a broader legal dispute between Kalshi and state authorities over whether prediction markets offering sports contracts fall under state gambling regulations or federal financial-market jurisdiction. Last December, Connecticut’s Department of Consumer Protection sent Kalshi and two other platforms cease-and-desist letters, asking them to no longer offer, promote, or make unlicensed online gambling available to the people of Connecticut, with special emphasis on sports wagers. The platforms were also ordered to enable Connecticut customers to withdraw funds held on their accounts. “Only licensed entities may offer sports wagering in the state of Connecticut. None of these entities possesses a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21,” argued commissioner Bryan T. Cafferelli at the time. Kalshi subsequently sued Connecticut, arguing that its prediction contracts are financial instruments regulated exclusively by the federal Commodity Futures Trading Commission (CFTC). Earlier in August, a US district judge denied Kalshi’s request for a preliminary injunction against enforcement of Connecticut law. Kalshi has appealed that decision to the Second Circuit Court of Appeals, according to the state. The federal government is also involved in the dispute. Connecticut says the CFTC has sued the state and two other states, arguing that prediction markets should be regulated exclusively at the federal level and moving to dismiss that case.