In brief
- A federal judge has ordered Connecticut regulators to refrain from enforcement action against prediction market Kalshi pending a preliminary injunction decision.
- The order follows cease-and-desist letters Connecticut issued last week to Kalshi, Robinhood, and Crypto.com over alleged unlicensed sports gambling.
- Kalshi says its CFTC designation grants exclusive federal jurisdiction, while Connecticut claims the contracts violate state gaming laws.
A federal judge has temporarily blocked Connecticut from enforcing gambling laws against prediction market Kalshi, ordering state regulators to hold off on any enforcement action while the court weighs the company’s request for a preliminary injunction.
In a Monday order, U.S. District Court Judge Victor Bolden instructed state officials to refrain from taking enforcement action regarding any conduct described in a cease-and-desist letter.
The order follows Connecticut’s Department of Consumer Protection issuing cease-and-desist letters last week to Kalshi, Robinhood, and Crypto.com, demanding they halt operations in the state over what regulators labeled as unlicensed online sports gambling.
The temporary pause will remain in place pending the court’s decision on Kalshi’s motion for a preliminary injunction, with oral arguments scheduled for February 12, 2026.
Cease-and-desist battle
The Gaming Division of Connecticut’s Department of Consumer Protection said it issued the letters directing all three platforms to stop offering sports event contracts to Connecticut residents and allow local users to withdraw their funds.
The department warned that noncompliance could trigger civil penalties and criminal sanctions under state gaming and consumer protection laws.
The very next day, Kalshi filed a motion for a preliminary injunction against Connecticut to prevent the state from enforcing its civil and criminal laws during litigation.
The company said it operates under exclusive federal jurisdiction as a CFTC-designated contract market, making state gambling regulations inapplicable.
The platform also pointed out that Connecticut’s gambling laws are preempted by the Commodity Exchange Act and its implementing regulations.
The company cited a similar case in New Jersey, where a federal court granted Kalshi a preliminary injunction in April, finding that the CFTC’s exclusive jurisdiction likely preempts state gaming laws as applied to designated contract markets.
Nationwide regulatory fight
The brewing fight between Kalshi and state regulators has spread nationwide, with multiple states challenging the company’s operations.
Last week, Kalshi lost the preliminary injunction that had protected it from enforcement in Nevada.
The company sought to preserve the injunction on appeal, citing imminent criminal enforcement in Nevada, and regulators then agreed to hold off on enforcement while the court reviews its request.
However, they noted that Kalshi has unreasonably refused to stop its activities in the state, even while Crypto.com and Robinhood have entered into agreements with state regulators to avoid enforcement pending appeal.
Briefing schedule
Under the court’s briefing schedule, Connecticut must file its response to Kalshi’s preliminary injunction motion by January 9, 2026, with Kalshi’s reply due January 30, 2026.
Daniel Wallach, founder and principal of Wallach Legal LLC, a law firm specializing in sports wagering and gaming law, previously told Decrypt that he expects Arizona and Illinois, which have issued cease-and-desist letters and warned state-licensed operators against prediction markets, will likely litigate with Kalshi next.
Kalshi’s chief competitor, Polymarket, was cleared by the CFTC to resume U.S. operations last month, almost four years after regulators forced it offshore for alleged noncompliance.
On prediction platform Myriad’s perpetual sentiment market, nearly 70% of users favor Polymarket over Kalshi.
(Disclaimer: Myriad is owned by Decrypt’s parent company, Dastan.)
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