Federal judge pauses Connecticut enforcement against Kalshi pending hearing
A federal judge in Connecticut has temporarily paused state enforcement in a growing jurisdictional fight over event-contract trading. In an order issued this week, the court told regulators to hold off while it weighs Kalshi’s bid for preliminary relief. This early procedural step—Connecticut judge blocks action against Kalshi follows cease-and-desist letters the state sent on Dec. 2 to Kalshi and two other platforms.
Background and What’s New
Connecticut’s Department of Consumer Protection (DCP) issued cease-and-desist orders on Dec. 2 to Kalshi, Robinhood Derivatives, and Crypto.com, alleging the firms conducted unlicensed online gambling through “sports event contracts.”
The next day, Kalshi sued in federal court, arguing its products are lawful under federal commodities law and fall under the Commodity Futures Trading Commission (CFTC). A U.S. district judge has now told the DCP to refrain from enforcement while the court considers Kalshi’s motion for temporary relief.
What the Order Says and the Timeline
Stay of enforcement
DCP must hold off on actions against Kalshi during the motion’s pendency.
Briefing schedule
DCP’s response due Jan. 9; Kalshi’s additional support due Jan. 30.
Hearing
Oral arguments are expected in mid-February; reporting indicates Feb. 12, 2026, at 10:00 a.m. Law360+2Cryptonews+2
What Each Side Argues
Connecticut’s Position
State regulators say the platforms’ “sports event contracts” constitute sports wagering requiring a state license and consumer safeguards (age limits, financial integrity, advertising rules). The DCP’s letters warn of potential civil and criminal penalties.
Kalshi’s Position
Kalshi asserts it is a federally regulated designated contract market under the CFTC, and that its event contracts are financial derivatives within the CFTC’s exclusive jurisdiction not gambling subject to state law.
What This Temporary Order Does and Doesn’t Do
Does
Prevents Connecticut from acting against Kalshi for now, preserving the status quo.
Doesn’t
Decide the merits of whether Kalshi’s markets are legal under state or federal law. The ultimate outcome will turn on statutory interpretation and federal preemption questions.
Market and Industry Context
The pause comes amid heightened scrutiny of prediction markets across states and rapid fundraising in the sector. In early December, Kalshi announced a $1 billion round valuing the company at $11 billion, following growth claims reported by multiple outlets; earlier in 2025, Reuters reported a $2 billion valuation after a mid-year raise illustrating the pace of change.
What happens next if Connecticut judge blocks action against Kalshi pending a hearing?
The court will review briefing on federal preemption and the nature of event-based contracts.
If the judge grants a preliminary injunction, DCP could be barred from enforcement during the case.
If the judge denies it, the state could resume enforcement while litigation continues.
Either outcome could be appealed.
Key legal questions in Connecticut judge blocks action against Kalshi
Are Kalshi’s event contracts “swaps/futures” within the CFTC’s exclusive domain?
Do state gambling laws apply to event-contract platforms despite federal regulation?
What limits, if any, exist for contracts tied to sports or political outcomes?
Context & Analysis
The court’s temporary restraint is a procedural safeguard, not a signal on ultimate legality. The core dispute federal commodities regulation vs. state gambling oversight could set influential precedent for event-contract platforms nationwide. Similar actions in other states, including new litigation in Massachusetts, show this fight is broadening.
Conclusion
The immediate impact remains limited, as Kalshi can continue its operations without facing new enforcement actions from Connecticut for now. This temporary relief allows the company to function normally while the court evaluates its motion. However, the situation is still uncertain, and no long-term guarantee has been established yet.
The upcoming February hearing will be critical in determining Kalshi’s future in the state. During this session, the judge is expected to clarify whether Kalshi will receive extended protection or if Connecticut may resume regulatory action. The decision will significantly shape Kalshi’s ability to operate freely moving forward.
FAQs
Q : What did the judge decide?
A : A temporary order instructs Connecticut’s DCP not to enforce against Kalshi while the court considers a preliminary injunction.
Q : Does this mean Kalshi won the case?
A : No. It’s an interim step that preserves the status quo; the merits are undecided.
Q : When are the next key dates?
A : DCP response by Jan. 9, Kalshi filing by Jan. 30, and a mid-February hearing (reported as Feb. 12).
Q : Why is the CFTC involved?
A : Kalshi argues its event contracts are financial derivatives under the CFTC’s exclusive jurisdiction, not state-regulated gambling.
Q : What did Connecticut allege?
A : The state claimed the platform offered unlicensed online gambling through “sports event contracts.”
Q : How does this affect users in Connecticut today?
A : The order pauses state enforcement against Kalshi, but it does not determine long-term legality. Users must wait for the court’s ruling.
Q : Is this the first state challenge to Kalshi?
A : No. Other states have taken action or raised concerns; Massachusetts recently sought a court order.
Q : Does the ruling apply to Robinhood or Crypto.com?
A : No. This case and order apply only to Kalshi; other companies depend on their own state proceedings.
Q : Does “Connecticut judge blocks action against Kalshi” mean the platform is fully legal?
A : No. It only reflects a temporary restraint, not a final legality decision.
Facts
Event
Court temporarily restrains Connecticut DCP from enforcing against KalshiDate/Time
2025-12-10T00:00:00+05:00Entities
KalshiEX LLC; Connecticut Department of Consumer Protection (DCP); U.S. District Court, District of Connecticut; Judge Vernon D. Oliver; CFTCFigures
DCP letters issued 2025-12-02; briefing due Jan. 9 and Jan. 30; oral arguments mid-February (reported 2026-02-12 10:00)Quotes
“Refrain from taking enforcement action against Kalshi.” (court order summary, as reported)Sources
CT DCP press release (https://portal.ct.gov/dcp/…); Law360 (order and schedule); CoinDesk/other industry reports on the cease-and-desist; reports on funding/valuation. Reuters+3CT.gov+3Law360+3