Connecticut can’t take action against Kalshi for now, judge rules

A US judge has granted prediction markets platform Kalshi a temporary reprieve from enforcement after the state of Connecticut sent it a cease and desist order last week for allegedly conducting unlicensed gambling.

The Connecticut Department of Consumer Protection (DCP) sent Kalshi, along with Robinhood and Crypto.com, cease and desist orders on Dec. 2, accusing them of “conducting unlicensed online gambling, more specifically sports wagering, in Connecticut through its online sports event contracts.”

Kalshi sued the DCP a day later, arguing its event contracts “are lawful under federal law” and its platform was subject to the Commodity Futures Trading Commission’s “exclusive jurisdiction,” and filed a motion on Friday to temporarily stop the DCP’s action.

An excerpt from Kalshi’s preliminary injunction motion arguing that the DCP’s action violates federal commodities laws. Source: CourtListener

Connecticut federal court judge Vernon Oliver said in an order on Monday that the DCP must “refrain from taking enforcement action against Kalshi” as the court considers the company’s bid to temporarily stop the regulator.

The order adds that the DCP should file a response to the company by Jan. 9 and Kalshi should file further support for its motion by Jan. 30, with oral arguments for the case to be held in mid-February.

Kalshi does battle with multiple US states

Kalshi is a federally regulated designated contract maker under the CFTC and, in January, began offering contracts nationally that allow bets on the outcome of events such as sports and politics.

Related: How prediction markets raise insider trading and credit risks

Its platform has become hugely popular this year and saw a record $4.54 billion monthly trading volume in November, attracting billions in investments, with Kalshi closing a $1 billion funding round earlier this month at a valuation of $11 billion.

However, multiple US state regulators have taken issue with Kalshi’s offerings, which have led to the company being embroiled in lawsuits over whether it is subject to state-level gambling laws.

Kalshi sued the New York State Gaming Commission in October after the regulator sent a cease and desist order claiming it offered a platform for sports wagering without a license.

In September, Massachusetts’ state attorney general sued Kalshi in state court, which the company asked to be tossed. So far this year, Kalshi has sued state regulators in New Jersey, Nevada, Maryland and Ohio, accusing each of regulatory overreach.

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