Connecticut officials get significant win, suffer small defeats in legal dispute with Kalshi

Decisions out of courtrooms for officials in Connecticut’s state government in their dispute with Kalshi were mostly positive this week as the United States District Court for the District of Connecticut paved the way for an escalation of that dispute. The lawsuit filed by Connecticut Attorney General William Tong in state court did produce a favorable result for Kalshi, though, allowing the status quo regarding sports event contract access in Connecticut to persist for now.

That status quo could change quickly as this litigation moves forward on both levels. The CFTC’s lawsuit against Connecticut officials might also play a role in the near future.

(Photo by Samuel Boivin/NurPhoto via Getty Images)

Tong takes initiative following early court victory

US District Judge Vernon D. Oliver denied Kalshi’s request for a preliminary injunction barring officials like Tong from enforcing the state’s gambling laws against itself. Tong moved quickly after Oliver handed down that decision, suing Kalshi in the Connecticut Superior Court.

A press release from Tong’s office states that the lawsuit seeks a permanent injunction barring Kalshi from offering sports event contracts to people in the state. It adds that trading those contracts is tantamount to sports wagering, which Connecticut law permits only via the state lottery and gaming compacts with tribal authorities within Connecticut’s borders.

While that action could affect Kalshi’s future in the state, any modifications to the current situation will come after Kalshi has responded to the lawsuit. Kalshi got small and temporary wins amid Tong’s filing.

Courts give Kalshi time to respond to enforcement

Tong’s state court lawsuit sought immediate action using an instrument in Connecticut law that could have moved against Kalshi’s sports event contracts. However, Judge Lisa Kelly Morgan denied that request for an ex parte restraining order against Kalshi.

Meanwhile, Kalshi also successfully petitioned the federal district court to remove the case there. Tong can petition to remand the case back to state court, though.

The significant impact of these decisions is that they give Kalshi time to mount a proper defense to the allegations. The developments also buy time for related litigation to intervene.

CFTC lawsuit against Connecticut still pending

The US Commodity Futures Trading Commission (CFTC) filed its own lawsuit against Tong and other Connecticut office holders in April. That lawsuit in the same federal district court alleges that those officials’ attempts to enforce the state’s gambling laws against prediction market exchange operators violates the US Constitution.

While there have been minor rulings in that case, the court has yet to issue any significant decisions. The CFTC has also asked for a preliminary injunction, so a ruling on that petition could drop at any time.

That could put the brakes on Tong’s lawsuit, but Kalshi is moving toward that end as well. It appealed the district court’s decision to deny its injunction request to the US Second Circuit Court of Appeals.

While the long-term future of trading sports event contracts in Connecticut is very much in doubt, people in the state have access to these markets for now. If any one of several possible scenarios plays out the appropriate way, Kalshi could find itself needing to restrict those offerings for people in Connecticut.

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