Prediction market operator Kalshi has asked a federal appeals court to block Connecticut from enforcing its gambling laws against the company, escalating a fight over whether sports event contracts are federally regulated financial instruments or illegal sports bets.
KalshiEX LLC filed an emergency motion Monday with the 2nd U.S. Circuit Court of Appeals in New York, asking the court to halt state enforcement while it appeals an Aug. 10 ruling by U.S. District Judge Vernon D. Oliver in Hartford. Oliver refused to shield Kalshi from Connecticut gambling regulators.
The state opposed the request Tuesday, asking the appeals court to deny emergency relief and give Attorney General William Tong’s office until Aug. 24 to file a full response.
Kalshi, which is licensed by the U.S. Commodity Futures Trading Commission as a designated contract market, argues that the federal Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over contracts traded on its exchange, preempting state gambling laws.
“If Connecticut could use its gambling laws to regulate instruments traded on federally designated exchanges, so could 49 other states,” Kalshi wrote. The result, it said, would be “total chaos.”
Oliver rejected Kalshi’s preemption argument in a 38-page ruling, finding that its sports contracts do not qualify as “swaps” under federal law because their value depends on the outcome of a game.
“Kalshi characterizes its sports-related event contracts in various ways, but at bottom, they are sports wagers,” Oliver wrote, citing a Nevada federal court ruling.
Oliver also found that Kalshi had not shown it would suffer irreparable harm without an injunction. Kalshi told the court it has more than 24,000 Connecticut users with millions of dollars in open positions and argued that shutting them out would cost it business and goodwill that could not be recovered.
The judge noted that Kalshi “has been on notice of the potential for state enforcement against its contracts since it began offering them” while continuing to advertise itself as the “first app for legal sports betting in all 50 states.”
The dispute began in December 2025, when the state Department of Consumer Protection’s Gaming Division ordered Kalshi, Robinhood Derivatives LLC and Crypto.com to stop offering sports event contracts to Connecticut residents. Regulators said the companies lacked state gambling licenses, accepted wagers from people under 21 and targeted residents on Connecticut’s self-exclusion list.
Connecticut licenses three online sports wagering operators: DraftKings, partnered with Foxwoods; FanDuel, partnered with Mohegan Sun; and Fanatics, partnered with the Connecticut Lottery Corp.
Kalshi is also facing competition from Polymarket.
In its filing Tuesday, Assistant Attorney General Joseph Gasser urged the appeals court to deny emergency relief.
Gasser also questioned Kalshi’s claims of financial harm, pointing to the company’s announcement in May that it had raised $1 billion at a $22 billion valuation.
“These are not the claims of a company whose prediction contract offerings are meaningfully threatened by the lack of an injunction pending appeal,” Gasser wrote.
The case comes as federal courts take differing positions on Kalshi’s sports contracts. The 3rd U.S. Circuit Court of Appeals ruled for Kalshi earlier this year, finding that the Commodity Exchange Act preempts state gambling laws. The 6th Circuit went the other way in April, denying Kalshi’s request for an injunction.
District judges in Maryland, Nevada, Arizona, Utah and New York also have sided with state regulators.
The CFTC has backed Kalshi’s position. In April, the agency sued Connecticut and seven other states over efforts to regulate Kalshi’s sports contracts. In June, the CFTC proposed a rule stating that certain sports event contracts are consistent with the public interest.
The CFTC’s lawsuit against Connecticut remains pending before Oliver.
