Kalshi has added Connecticut to its growing list of states where it is challenging regulators over prediction market operations. On December 2, the Connecticut Department of Consumer Protection’s (DCP) Gaming Division issued cease-and-desist letters to Kalshi, Robinhood, and Crypto.com, claiming the platforms were offering illegal sports wagers and demanding they halt activity and return customer funds.
“Only licensed entities may offer sports wagering in the state of Connecticut,” said DCP Commissioner Bryan T. Cafferelli. “None of these entities possess 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.”
The DCP also highlighted concerns over lack of state regulation, integrity controls, and marketing to restricted groups, including college students and self-excluded gamblers. Officials warned of potential insider trading risks and emphasized that “a prediction market wager is not an investment.”
Kalshi Responds With Federal Lawsuit
Hours after receiving the cease-and-desist notice, Kalshi filed a lawsuit in the U.S. District Court for the District of Connecticut, seeking an injunction to block the DCP’s enforcement. The complaint mirrors Kalshi’s actions in Maryland, Nevada, New Jersey, New York, and Ohio, arguing that the Commodity Exchange Act (CEA) preempts state gambling laws and grants the Commodity Futures Trading Commission (CFTC) exclusive authority over its event contracts.
Kalshi’s filings point out that the Connecticut letter mainly addresses sports-related contracts, even though the state’s gambling statutes could broadly cover other event contracts on its platform. A similar argument was raised in Massachusetts, where the state’s lawsuit focuses on sports contracts, but Kalshi contends enforcement would inadvertently block all event contracts on the platform.
National Legal Context
Connecticut joins a nationwide wave of scrutiny. New York issued a cease-and-desist in October, prompting a lawsuit. Nevada recently saw a federal judge reverse an injunction favoring Kalshi. Massachusetts filed its own legal action, while tribal authorities in California and Wisconsin argued that prediction markets violate the Indian Gaming Regulatory Act; a California judge ruled CFTC oversight precludes classification as wagers.
Market Expansion Amid Legal Battles
Despite regulatory pressure, Kalshi continues to grow. It closed a $1 billion funding round, bringing its valuation to $11 billion, and partnered with CNN and CNBC to provide “real-time insights from Kalshi.”CEO Tarek Mansour called the market “massive” and emphasized scaling to meet demand.
Polymarket also advanced, opening its U.S. platform to over 200,000 users from a waitlist after a beta phase, supported by investment from the New York Stock Exchange owner. Fanatics launched Fanatics Markets ahead of DraftKings and FanDuel, entering the prediction market space.
The NFL, by contrast, is holding back. Commissioner Roger Goodell said, “We are going to see how things play out, from a regulatory standpoint. There are a lot of legal challenges going on right now,” signaling no immediate plans to partner with prediction markets.
The legal landscape for prediction markets remains fragmented. States like Connecticut emphasize consumer protection and regulatory compliance, while federally regulated platforms assert CFTC authority. Court rulings could redefine state versus federal control, the scope of legal event contracts, and the responsibilities of market operators.
Source:
“Kalshi sues Connecticut in big week of prediction markets news”, igamingbusiness.com. Dec 4, 2025
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