Connecticut-Kalshi Fight Deepens With New Enforcement Lawsuit
Connecticut has moved from defending its authority over Kalshi to pursuing an injunction, penalties and the return of revenue generated in the state.
Connecticut has opened the latest chapter in its legal battle with Kalshi, filing a new enforcement lawsuit aimed to stop the prediction market operator’s sports contracts and recover revenue generated in the state.
Attorney General William Tong and the Connecticut Department of Consumer Protection (DCP) filed the action in Hartford Superior Court. The officials allege Kalshi is operating an unlicensed sports wagering business and violating the Connecticut Unfair Trade Practices Act.
Kalshi has already removed the case to federal court, while its separate appeal over whether federal law preempts Connecticut’s attempt to regulate its sports event contracts remains pending before the Second Circuit.
Connecticut Requests Disgorgement, Injunction
Connecticut is seeking temporary and permanent injunctions preventing Kalshi from offering unlicensed sports wagering. The state also seeks restitution, civil penalties and disgorgement.
Connecticut wants to recover all revenue Kalshi generated through what the complaint calls “its unlawful operation”. Alternatively, the state is after taxes, fees and contributions Kalshi would have paid had it operated as a licensed sportsbook.
The complaint alleges Kalshi has offered unlicensed sports wagering in Connecticut since January 2025. Thus, the state claims, Kalshi has not complied with the requirements imposed on regulated sportsbooks.
Other claims include that the platform allows users aged 18 to 20 to trade sports contracts despite the state’s 21+ betting age, and that it has targeted younger users through paid influencers and college ambassador programs. The state also says Kalshi lacks responsible gaming tools and protections required of licensed operators, such as self-exclusion.
Connecticut also argues that the operator does not meet the same financial auditing, account security and integrity monitoring requirements imposed on licensed sportsbooks.
The state is using consumer protection law to challenge Kalshi’s product presentation. It alleges the company has marketed sports contracts as investments and falsely suggested they are legal nationwide.
Sports event contracts are no different than sports betting and are not magically shielded by federal law from Connecticut’s commonsense consumer protection laws,” Tong said.
Lawsuit Follows Earlier Kalshi Defeats
The legal battle began in December 2025, when the DCP issued a cease-and-desist letter to Kalshi and other prediction markets for offering unlicensed sports wagering.
Kalshi responded by suing Connecticut officials in federal court, arguing that its event contracts fall under the Commodity Exchange Act and are subject to exclusive federal jurisdiction.
Earlier this month, U.S. District Judge Vernon D. Oliver denied Kalshi’s request for a preliminary injunction. Connecticut cites that ruling directly in its new complaint, including Oliver’s conclusion that Kalshi’s contracts, “at bottom, they are sports wagers.”
Oliver later denied Kalshi an injunction pending appeal.
Kalshi then turned to the Second Circuit, seeking a temporary injunction pending appeal. U.S. Circuit Judge Sarah A. L. Merriam denied that request while a three-judge panel considers its broader motion for an injunction pending appeal.
Those decisions left Connecticut free to pursue enforcement while Kalshi’s appeal proceeds.
Kalshi Removes Case as Second Circuit Decision Looms
Connecticut initially sought an ex parte temporary injunction in state court that could have immediately blocked Kalshi’s sports contracts. The court denied immediate relief and scheduled a Sept. 17 injunction hearing.
Kalshi then removed the case to the U.S. District Court for the District of Connecticut. Connecticut could now seek to remand the case to state court. Gaming attorney Daniel Wallach pointed out on X that if the case is assigned to Oliver as related litigation, a remand motion could be decided quickly, given his earlier ruling rejecting Kalshi’s preemption argument.
The removal also increases the significance of Kalshi’s pending Second Circuit request for an injunction while its appeal proceeds.
Wallach noted that Kalshi has now been denied temporary relief by individual Second Circuit judges in both its Connecticut and New York appeals. However, three-judge panels have yet to rule on the underlying injunction requests.
Without relief from the Second Circuit, Kalshi faces the prospect of Connecticut continuing its enforcement push while the operator’s broader appeal plays out.
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