Connecticut Files State Court Suit Against Kalshi — Ex Parte TRO Denied, Kalshi Counter-Sues the Next Day
Connecticut Attorney General William Tong, Consumer Protection Commissioner Bryan Cafferelli, and Governor Ned Lamont have filed a state court lawsuit against Kalshi in Connecticut Superior Court, seeking an injunction to block sports event contracts, plus disgorgement, restitution, and civil penalties. The court denied an immediate ex parte temporary restraining order. Kalshi counter-sued state officials the following day. The state court suit is separate from the federal D. Connecticut case — where Judge Oliver denied Kalshi's preliminary injunction on August 11 — creating two simultaneous Connecticut proceedings targeting the same contracts.
Connecticut Attorney General William Tong, Department of Consumer Protection Commissioner Bryan Cafferelli, and Governor Ned Lamont filed a lawsuit in Connecticut Superior Court on August 27, accusing Kalshi of operating unlicensed sports gambling in the state. The complaint seeks injunctive relief to stop Kalshi from offering sports event contracts to Connecticut residents, plus disgorgement of profits, restitution for affected users, and civil penalties. The Connecticut Superior Court denied the state's request for an immediate ex parte TRO — a restraining order issued without first giving Kalshi an opportunity to respond — meaning Kalshi can continue operating while the litigation proceeds. Kalshi counter-sued Connecticut state officials the following day.
The state court filing is a structural escalation of the Connecticut enforcement action. Connecticut's Department of Consumer Protection issued cease-and-desist notices in December 2025, triggering Kalshi's federal court suit and the CFTC's intervention. That federal track produced a PI denial on August 11 — Judge Oliver's 'not a swap' ruling, now on appeal to the Second Circuit. The state court suit is an entirely separate enforcement track: rather than defending against Kalshi's federal preemption argument, AG Tong is now bringing affirmative state enforcement claims through a state court that does not share the D.Conn. federal court's preemption framework. Kalshi will almost certainly seek to remove the state court case to federal court, at which point the removal and remand fight will produce its own procedural litigation. Connecticut's aggressive two-track approach — defending in the Second Circuit while simultaneously opening a new state court front — reflects a strategy of using procedural volume to force Kalshi to fight on multiple fronts simultaneously.
The timing of the Connecticut state court suit, one day before the Ninth Circuit's 3-0 ruling against Kalshi, was likely coordinated with other state AG offices watching the appellate landscape. The Ninth Circuit decision — issued August 28, the day after Connecticut's filing — provides the most authoritative appellate support yet for the argument that sports event contracts are not swaps and are subject to state regulation. Although Connecticut is in the Second Circuit (not the Ninth), the Ninth Circuit ruling is persuasive authority that state courts and federal courts outside the Ninth Circuit can cite. CT AG Tong's office would have had access to the draft or circulating opinion before publication; the filing timing suggests the state was ready to move the moment appellate support materialized.
Connecticut now has two simultaneous prediction market cases: the federal case (D. Conn. PI denial on appeal to the Second Circuit) and the state court case (Kalshi counter-suit filed August 28). The Second Circuit appeal will resolve the federal preemption question; the state court case tests whether state consumer protection and gambling enforcement can reach Kalshi independently of the CFTC preemption argument. If the Second Circuit eventually upholds Judge Oliver's 'not a swap' reasoning and rules that Connecticut's laws apply, the state court case becomes the enforcement vehicle. If the Second Circuit reverses and rules the CEA preempts state law, the state court case is likely stayed or removed to federal court and dismissed. Connecticut's dual-track approach maximizes the probability that some enforcement vehicle is available regardless of how the federal preemption question resolves.
Operators mentioned in this article
Recent updates
Kalshi's Parlays Drive Back-to-Back $5B Days — and Hand Critics Their Strongest Argument
Kalshi traded a record $5.33 billion on November 7 and $5.36 billion on November 8, with multi-leg parlay-style 'combos' making up roughly 75% of both days' volume. Its 30-day volume topped $100 billion. But the parlay dominance cuts against the platform's legal defense: parlays are a quintessential sportsbook product, and the American Gaming Association has told the Second Circuit that parlays make up about two-thirds of Kalshi's volume and should be treated as sports bets. The implied house edge on 10-plus-leg combos is around 25%, undercutting the argument that these are neutral financial instruments rather than gambling.
Cruz Bill Would Require State or Tribal Approval for Sports Contracts — a Bipartisan Legislative Threat Emerges
Senator Ted Cruz, who chairs the Senate Commerce Committee, is preparing a bill that would bar federally regulated prediction markets from offering gambling-tied event contracts, including sports, unless a state or tribal government authorizes them. It would not ban the contracts nationwide but would require platforms to obtain approval jurisdiction by jurisdiction, resembling state-by-state sportsbook regulation. The proposal arrives as Democrats take control of both chambers after the midterms, creating a potential bipartisan reckoning: a Republican committee chair and a newly skeptical Democratic majority both eyeing restrictions on a sector that had relied on federal protection.
CFTC Tells Platforms to Stop Geofencing States — Directly Colliding With State Court Orders
The CFTC issued an interpretation on November 5 of its 'impartial access' core principle, telling regulated exchanges including Kalshi and Polymarket to drop state-by-state geographic blocks within 30 days or explain why they cannot. The demand collides head-on with existing state court orders that require the platforms to geofence: Washington ordered Kalshi to geofence in August, and Michigan ordered it to use licensed geolocation to block the state in September, with a $500,000 daily fine for violations. Chairman Michael Selig framed the interpretation as a uniformity requirement. The platforms are now caught between a federal demand to unblock states and state court orders to block them.