A federal judge has granted prediction market operator Kalshi a temporary shield from enforcement by the Connecticut Department of Consumer Protection (DCP), pausing the state’s move to classify the platform’s event contracts as illegal gambling.

The ruling came days after Connecticut issued cease and desist letters to Kalshi, Robinhood, and Crypto.com, alleging the companies were offering unlicensed online sports wagering through event-based contracts.

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An excerpt from Kalshi’s preliminary injunction motion arguing that the DCP’s action violates federal commodities laws. Source: CourtListener

Kalshi responded quickly, filing a lawsuit arguing that its products fall under federal commodities law and are regulated exclusively by the Commodity Futures Trading Commission (CFTC). The company sought an immediate halt to Connecticut’s enforcement efforts while the case proceeds.

Court pauses enforcement while dispute unfolds

In an order issued Monday, Judge Vernon Oliver directed the DCP to refrain from pursuing any enforcement action against Kalshi until the court rules on the company’s request for temporary relief.

The judge set a preliminary schedule: Connecticut must file its response by Jan. 9, Kalshi will submit additional arguments by Jan. 30, and oral hearings are expected in mid-February. The outcome could have broad implications for how states treat federally regulated prediction markets.

A growing clash between Kalshi and state regulators

Kalshi, a CFTC-designated contract market, began offering nationwide event contracts this year covering outcomes such as elections, economic indicators, and sports events. Its rapid growth has drawn significant attention: the platform hit a record $4.54 billion in trading volume in November and recently closed a $1 billion funding round at an $11 billion valuation.

But several U.S. states argue Kalshi’s products resemble unlicensed gambling, creating a patchwork of legal battles across the country.

In recent months, regulators in New York, Massachusetts, New Jersey, Nevada, Maryland, and Ohio have issued warnings or sought enforcement, prompting Kalshi to push back with lawsuits accusing these agencies of overstepping their authority. The core dispute centers on whether event-based contracts fall under federal commodities oversight or state gambling laws.

The Connecticut case now joins a larger national debate over how event markets should be regulated — and who has the final say.