Judge Hits Pause as Kalshi Fires Back at States in Escalating Legal Clash

A US federal judge has given prediction markets platform Kalshi a temporary break from enforcement after Connecticut ordered the company to halt what the state called unlicensed gambling activity. 

The Connecticut Department of Consumer Protection issued cease and desist notices on Dec. 2 to Kalshi, Robinhood and Crypto.com. The notices accused them of running unlicensed online gambling through sports related event contracts that users can trade on each platform.

Kalshi responded with a lawsuit the next day. The company argued that its event contracts follow federal law and fall under the Commodity Futures Trading Commission’s exclusive jurisdiction. It also filed a motion last Friday to pause all action from the state while the court studies the dispute.

Judge Orders a Timeout for Regulators

On Monday, Connecticut federal court judge Vernon Oliver ordered the DCP to stop any enforcement against Kalshi while the case moves forward. The ruling sets a short timeline for the next steps. The DCP must file its response by Jan. 9. The company must submit additional support for its motion by Jan. 30. 

Oral arguments are currently planned for mid February, setting up a closely watched hearing that could shape the future of prediction markets in the country.

Kalshi has seen strong growth this year and has marketed itself as a compliant platform under direct federal oversight. The company acts as a designated contract maker regulated by the CFTC and began offering nationwide contracts in January that allow users to trade on outcomes in sports, politics and other public events. 

Kalshi’s growth has been rapid, with a record $4.54 billion in monthly trading volume in November and a new $1 billion funding round this month that set its valuation at $11 billion.

Kalshi Faces Growing List of State Challenges

Despite its federal status, Kalshi has faced pushback in several states. Regulators argue that many of its event markets cross into sports wagering, which requires state level licenses. This dispute has led to a series of courtroom battles across the country.

In October, Kalshi sued the New York State Gaming Commission after receiving a cease and desist notice that accused it of offering sports wagering without approval. 

A month earlier, the Massachusetts attorney general filed a lawsuit in state court, which the company later asked to dismiss. Over the past year, the company has taken legal action against regulators in New Jersey, Nevada, Maryland and Ohio as well, accusing each of overreach.