Judge Vernon D. Oliver of the US District Court for the District of Connecticut has denied prediction-market platform Kalshi’s request for a preliminary injunction against Connecticut’s gambling regulators. The ruling clears the way for the state to enforce its cease-and-desist order and reinforces state authority over sports-event wagering, regardless of whether the wager is offered via a traditional sportsbook or a fintech-style prediction market.
What the Judge Ruled
At the core of the dispute: does Kalshi’s sports-event contract qualify as a “swap” under the federal Commodity Exchange Act (CEA), placing it under CFTC oversight, or is it a state-regulated sports wager?
Judge Oliver came down firmly on the wager side, writing:
“Kalshi’s sports-event contracts fail to satisfy this portion of the statutory definition of a swap because they do not depend on whether an underlying sporting event occurs, fails to occur, or occurs to a particular extent. Instead, Kalshi’s sports-event contracts depend on the event’s outcomes or discrete in-game occurrences.”
Oliver also flagged Kalshi’s marketing language, noting the platform has promoted itself as offering “legal sports betting nationwide” — inconsistent with the argument that it isn’t subject to state sports betting law.
Why This Matters for Connecticut
Connecticut’s Public Act 21-23 caps online sports betting at three licensed operators: FanDuel (Mohegan Tribe), DraftKings (Mashantucket Pequot Tribe), and Fanatics (CT Lottery). Prediction markets like Kalshi, Robinhood, and Crypto.com had begun offering sports-outcome contracts that critics argued functioned as unlicensed sports betting, sidestepping the state’s operator cap, tax structure, and consumer protections.
The CT Department of Consumer Protection issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com on December 2, 2025. Kalshi sued the following day, seeking to block enforcement on federal preemption grounds. A federal court paused enforcement in December 2025 pending a February 2026 hearing. This month’s ruling ends that pause — Connecticut can now proceed with enforcement.
The Broader Legal Split
The Connecticut ruling deepens a growing federal circuit split on prediction markets:
- Third Circuit (April 2025) — sided with Kalshi, ruling its contracts are “swaps” under the CEA and fall under CFTC jurisdiction. That case was based in New Jersey.
- District of Connecticut (May 2026) — sided with the state, ruling contracts are not swaps and remain subject to state gambling law.
Kalshi has already filed an appeal to the Second Circuit US Court of Appeals. According to US gaming law attorney Daniel Wallach, Kalshi is now involved in two Second Circuit appeals, both of which could be consolidated for oral argument.
The circuit split materially raises the probability of a US Supreme Court review. Traders on Kalshi’s own platform are reportedly pricing in a 64% chance of a Supreme Court case on prediction-market classification by the end of 2026, according to The Industry Spread.
State Coalition Against Prediction Markets
The stakes are national. At least 34 states and territories have filed amicus briefs backing state control over sports-event wagering. That kind of multistate consensus is unusual for a fintech regulatory dispute and reflects the significant tax and consumer-protection interests at stake if prediction markets were allowed to bypass state licensing.
Internationally, jurisdictions such as the United Kingdom and Canada treat similar products as gambling rather than derivatives, though US federal courts remain split on the question.
The Numbers Behind Prediction Markets
The commercial stakes reflect why this dispute matters:
- 2024 global prediction-market trading volume: $15.8 billion
- 2025 global volume: $63.5 billion (4× YoY growth)
- Q1 2026 volume: $75 billion
- Monthly volumes now regularly exceed $20–30 billion
- Leading platforms have crossed $10 billion valuations
If prediction markets can offer sports-outcome contracts nationwide without state licensing, they represent a direct competitive threat to the ~$150B/year US regulated sports betting market — and to state tax revenue lines like the $2M/month CT gets from its licensed operators.
What Happens Next in CT
Three practical consequences flow from the ruling:
- CT can enforce the December cease-and-desist. DCP Gaming Director Kristofer Gilman now has judicial clearance to proceed. Kalshi, Robinhood, and Crypto.com can be compelled to block CT residents from accessing sports-event contracts.
- Second Circuit appeal. Kalshi has appealed and will argue the CEA preemption question again at the appellate level. A Second Circuit reversal could restore Kalshi’s CT operations pending further appeals.
- Legislative connection to HB 5229. Connecticut’s HB 5229 (passed both chambers in May 2026, awaiting Governor Lamont’s signature) includes a study of prediction markets in CT. That study — mandated by legislation now moving through the state — will land at the same time federal appellate courts are deciding the underlying jurisdictional question.
The immediate practical effect for CT bettors: no material change. Kalshi and similar platforms were already blocked from serving CT residents under the December 2025 cease-and-desist. The ruling makes that enforcement legally durable, not new.