Kalshi Loses Bid for Preliminary Injunction in Connecticut Court

_{Ads like this one outside Madison Square Garden in New York City are no longer allowed in the state of Connecticut. (Photo: Richard Levine / Alamy)}

A federal judge denied motions by Kalshi and Coinbase seeking preliminary injunctions on Monday, rejecting the prediction markets bid for federal protection from Connecticut's attempts to enforce its gambling laws against their operations.

U.S. District Judge Vernon D. Oliver ruled that Kalshi's sports event contracts don't qualify as swaps under the Commodity Exchange Act (CEA). And even if they did, they still wouldn't be exempt from Connecticut’s gambling laws.

Oliver Finds Fault with Swap Definition

The ruling adds to a legal fight that began in December 2025, when Kalshi sued the Connecticut Department of Consumer Protection and its director, Kristofer Gilman, in response to cease-and-desist orders issued to the company. Coinbase later filed a similar lawsuit after launching Kalshi's contracts on its own platform in January 2026 as a futures commission merchant, even though Connecticut had never directed any enforcement action specifically at Coinbase.

Kalshi made the same argument that it has used in legal battles across the country: that its contracts, including those related to sporting events, are financial instruments falling solely under the Commodity Futures Trading Commission's jurisdiction.

That lawsuit was enough for the court to block Connecticut officials from taking enforcement action while it considered the injunction requests.

But on Monday, Oliver sided with the state. In his ruling, he found that Kalshi's event contracts on sports don’t qualify as swaps for several reasons, including the fact that they aren't “associated with a potential financial, economic, or commercial consequence,” despite the company’s arguments to the contrary. Kalshi said that its broad definition of swaps still had limits and that the winner of a game has consequences, while the exact final score does not. Oliver struggled to see the difference in his decision.

“The winner of a late-season game between two teams already eliminated from postseason contention may have relatively limited economic significance, whereas a losing team reaching a scoring threshold that secures playoff qualification or advancement under a tournament’s rules may have substantial financial consequences for players, coaches, teams, broadcasters, sponsors, and other stakeholders,” Oliver wrote in his decision. “Kalshi offers no principled basis for concluding that the former satisfies the statutory definition of a swap while the latter necessarily does not.”

He also warned that defining a swap too broadly, to include any event with "some downstream economic consequence," would be difficult to reconcile with the text Congress actually wrote.

The Exception That Proves the Rule?

Setting the swap question aside, Oliver wrote that it still wouldn’t stop Connecticut from enforcing its sports betting regulations in relation to prediction markets. In his ruling, he notes that other sections of the CEA specifically note limited circumstances in which state law cannot be applied to swaps, while that language doesn’t appear in relation to the markets being offered by prediction markets.

“Had Congress intended to occupy the field with respect to the types of contracts at issue here, it could have expressly said so, as it did in other contexts,” Oliver wrote. “The absence of such language, coupled with the CEA’s preservation of state authority and its recognition of concurrent state regulation in certain areas, weighs against a finding of field preemption.”

As in Utah, where a similar federal court ruling was made last week, Oliver’s ruling doesn’t create any immediate consequences for Kalshi. Instead, Connecticut officials would have to take the active step of enforcing laws against the prediction market – something the ruling now allows them to do.

Any such action would likely be challenged by Kalshi, and the company may also appeal Oliver’s decision.

“We respectfully disagree with the Court’s decision and are considering all legal options,” a Kalshi spokesperson said in a statement.

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