Connecticut Sues Kalshi, Cites ‘Unlicensed Sports Betting’

Connecticut is making the most of its recent federal court win against Kalshi by suing the online prediction market exchange.

CT officials are suing the prediction market giant over alleged unlicensed sports betting in an attempt to block its services.

Though Kalshi and others offer contracts on entertainment, politics, and the economy, CT is targeting sport-related markets.

Sports Markets ‘Not Magically Shielded by Federal Law’, CT Says

In a press release yesterday, the CT Attorney-General William Tong argued that “this is gambling”, referring to Kalshi sports event contracts.

Connecticut’s Department of Consumer Protection Gaming Division had issued cease-and-desist letters to Kalshi and two other platforms.

Kalshi responded by suing Connecticut: a common thread among state-vs-prediction markets tussles during 2026.

Connecticut won a major leg of its battle against the prediction markets last week. A federal judge ruled that CT can apply its sports betting laws to clamp down on or regulate prediction markets.

Kalshi had previously invoked an “emergency motion”, using the powers of its federal regulator, the Commodity Futures Trading Commission.

Federal judge Vernon Oliver characterized sports-related event contracts as “sports wagers” in a ruling last week. He also doubted whether Kalshi could convince a federal court that CT didn’t have the authority to overrule the markets.

Prediction Markets vs Sportsbooks: The Key Battlegrounds

The prediction markets have been growing in power, trading volume, and customer base for the past few years.

While they traditionally set up as financial platforms, you can now make binary options on thousands of markets. These include entertainment, politics, and – controversially – sports.

Kalshi, for example, offers share swaps on who will become the new 007, the winner of ‘Big Brother 28’, or the next Republican presidential nominee.

Contentiously, prediction markets like Kalshi and Polymarket are moving more into sports events. To the anger of some state regulators, the markets they offer resemble the sort you may find at a regulated sportsbook. These include “moneyline” style bets, player props, and parlays.

Federal Block in Minnesota Illustrates Ongoing Fight

The newest legal action by Connecticut is the latest in a series taken against the prediction markets.

Minnesota is fighting its own battle against the prediction exchanges. It enforced a ban on Kalshi earlier this year, before a federal judge blocked the move on a temporary basis.

The Minnesota law outlawing prediction markets was set to come in on August 1. Unfortunately for Minnesota, it doesn’t regulate sports betting at present, unlike Connecticut. It may have to move in this direction if it is to illustrate a “threat” to its existing interests.

Earlier in March, Ohio classified prediction markets on sports as betting. A judge rejected Kalshi’s argument that sports contracts were no different from financial transactions.

Supreme Court May Hold the Final Card

The constant tussle between state regulators, the CFTC, and the prediction markets could ultimately end in the Supreme Court.

Multiple states have delivered blocks, cease-and-desist orders, or outright bans in recent months. The pushback from the markets and the CFTC has been swift, but not always successful.

The U.S. Supreme Court could rule on prediction markets by next year, according to one executive. In June, prediction market exec Flip Pidot made a prediction of his own, telling Fortune that the Supreme Court may rule on the legal position within months.

It just needs a Second Circuit appeal to go with the prediction markets against the states to give the Supreme Court the ultimate power.