- A federal judge denied Kalshi’s bid to block Connecticut from enforcing its gambling laws against sports contracts.
- The court held the contracts are not swaps, leaving them outside the CFTC’s exclusive jurisdiction.
- The order says Congress never displaced the states’ historic police power over sports betting through Dodd-Frank.
- Coinbase lost a matching motion before the same judge the same day, with the Kalshi opinion attached.
HARTFORD, Conn. – A federal judge refused Monday to stop Connecticut from enforcing its gambling laws against Kalshi, holding that the prediction market’s sports contracts are not federally regulated swaps and that Congress never handed the states’ power to police sports wagering to the Commodity Futures Trading Commission.
The 38-page memorandum and order in KalshiEX LLC v. Cafferelli, No. 3:25-cv-02016, was signed by U.S. District Judge Vernon D. Oliver at Hartford on Aug. 7 and entered on the docket Aug. 10. It denies the preliminary injunction on all four factors.
Sports Contracts Are Not Swaps, So The CFTC Has No Exclusive Claim
The Commodity Exchange Act defines a swap as a contract whose payment turns on “the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency” that is “associated with a potential financial, economic, or commercial consequence.” Oliver found Kalshi’s sports markets fail both halves of that test.
On the first half, the court wrote that Kalshi’s markets do not turn on whether the underlying sporting event “occurs, fails to occur, or occurs to a particular extent.” They depend instead on “the event’s outcomes or discrete in-game occurrences.”
A boxing match is the event, the order reasons, and it can take place, not take place, or run three rounds. Who wins is not a separate event. Adopting language from a Nevada decision, the order puts it plainly: “who wins the Kentucky Derby is an outcome of that event, not a separate event in and of itself.”
On the second half, the court held the consequences Kalshi points to arise “from externalities surrounding the event rather than from the event itself,” such as endorsement deals, coaching bonuses and side wagers. Oliver noted that Kalshi told the D.C. Circuit in earlier litigation that contracts on games are “unlikely to serve any ‘commercial or hedging interest.'”
Because the contracts are not swaps, the order concludes, they never enter the CFTC’s exclusive jurisdiction and the CEA does not preempt state regulation of them.
Even If They Were Swaps, The CEA Would Not Preempt Connecticut
Oliver then decided the preemption question anyway, and rejected both theories Kalshi raised.
Field preemption failed on the statute’s own text. The same section granting the CFTC exclusive jurisdiction says that nothing in it shall “supersede or limit the jurisdiction at any time conferred on . . . other regulatory authorities under the laws of the United States or of any State.”
The court added that the special rule for event contracts lets the CFTC bar contracts involving “gaming” or “activity that is unlawful under any Federal or State law,” which reads as an affirmative preservation of state law rather than a displacement of it. Congress also displaced state gambling and bucket-shop laws expressly in a different section of the act, the order notes, which shows it knew how to say so when it meant to.
The order then reaches for Justice Antonin Scalia’s line about “hiding elephants in mouseholes,” calling it unlikely that Dodd-Frank quietly moved sports betting oversight to “a relatively small financial regulator with no historical role or particular expertise in regulating sports betting.” The court said neither party identified any congressional appropriation giving the CFTC money to regulate sports betting, then or since.
Conflict preemption failed too. Kalshi argued that geofencing one state would breach the CFTC rule requiring a designated contract market to give “impartial access” to its markets. That rule stops discriminatory access criteria, the court held, and does not require anyone to offer contracts nationwide. Connecticut’s laws “complement rather than conflict with federal law.”
The Order Points Kalshi Toward A Connecticut License
The order also raises an option Kalshi has not used. “It is unclear why Kalshi could not seek out a license pursuant to Connecticut law and establish a category of Connecticut market participants that does not discriminate within the state,” Oliver wrote.
Connecticut built that licensing path in 2021. Online gaming operators contract with one of three master wagering licensees, the Mashantucket Pequot Tribe, the Mohegan Tribe of Indians of Connecticut and the Connecticut Lottery Corp. The Department of Consumer Protection’s Gaming Division enforces the rules with 64 employees, six of them attorneys, eight assigned specifically to sports enforcement.
Operating outside that scheme can be charged as a class A or class B misdemeanor. Kalshi’s route into legal states with online sports betting is the same route every licensed book took.
Geofencing Nevada By Aug. 12 Undercut Kalshi’s Irreparable-Harm Case
Kalshi’s own representations undercut its harm argument. The company told the court at the Feb. 11 hearing that geofencing one state “effectively means geofencing everywhere,” and it has already pledged to geofence Nevada by Aug. 12 under a state court order, with the same deadline in Michigan. Restricting Connecticut on top of that, the order found, would add little.
The rest of the claimed injury was money. Losing more than 24,000 Connecticut users and building state-specific geolocation are “ordinary compliance costs,” the court held, and any civil penalty could be challenged later if Kalshi wins.
The court credited the state’s argument that the harm was largely self-inflicted, since Kalshi kept listing sports contracts through repeated regulatory warnings and adverse rulings while advertising itself as the “first app for legal sports betting in all 50 states.”
Sports contracts made up between 80% and 90% of the contracts listed on the platform and between 80% and 90% of its revenue, and the CFTC has never subjected a single one to review under the special rule. For USA gambling sites, the stacking geofence orders mean a contract listed in one state is blocked across the line in the next.
Fourteen Federal Suits, And Every State Court So Far Against Kalshi
The order also inventories the national scoreboard, and the split runs along a clean line. Kalshi has sued 14 states in federal court, in Nevada, New Jersey, Maryland, Ohio, New York, Connecticut, Illinois, Tennessee, Utah, Iowa, Arizona, Montana, Minnesota and Rhode Island. Federal judges have gone both ways, with injunctions granted in the 3rd Circuit and in Middle Tennessee, and denied in the 6th Circuit and in Utah, the Southern District of New York, Arizona, Maryland and Nevada.
State courts have not split at all. “[E]very state court to have issued a ruling has ruled against Kalshi,” the order states, citing orders in Massachusetts, Michigan and Nevada, all three of which directed geofencing. Massachusetts is stayed pending appeal.
Four state civil enforcement actions remain pending in Nevada, Washington, Massachusetts and Michigan, and a criminal enforcement action is pending against Kalshi in Arizona state court. That is the map this ruling hardens. Prediction markets now out-trade America’s sportsbooks, and the legal answer is arriving state by state rather than from Washington.
Coinbase Lost The Same Day, And A Rule 26(f) Report Is Due Aug. 24
Oliver denied a matching preliminary injunction to Coinbase Financial Markets on Aug. 10 in Coinbase Financial Markets, Inc. v. Tong, No. 3:25-cv-02121, attaching the Kalshi opinion as an exhibit, according to the docket entry.
The denial also lifts the shield Kalshi had been operating behind. A stipulated December order barred Connecticut from enforcing the Dec. 2 cease-and-desist letter only until the motion was decided, and that condition has now been met.
Appeals from the District of Connecticut go to the 2nd U.S. Circuit Court of Appeals. In the district court, the parties must file a Rule 26(f) report by Aug. 24, and the defendants may respond to the complaint by Aug. 31.