Connecticut Sues Kalshi: Major Crackdown on Prediction Markets

The legal confrontation between the state of Connecticut and prediction market operator Kalshi has reached a new level of intensity. Attorney General William Tong and the Connecticut Department of Consumer Protection (DCP) filed an enforcement lawsuit in Hartford Superior Court. The primary goal is to immediately halt Kalshi’s operations within the state and recover all revenues generated from its prediction contracts. Authorities allege that Kalshi is running an unlicensed sports wagering business, violating the Connecticut Unfair Trade Practices Act.

Kalshi has responded by moving the case to federal court. Meanwhile, a separate appeal remains pending before the Second Circuit to determine if federal law preempts Connecticut’s regulatory authority. However, state officials are undeterred, seeking both temporary and permanent injunctions. They are also demanding restitution and civil penalties. Connecticut intends to recover all revenue Kalshi generated through what the complaint describes as an unlawful operation, or alternatively, the taxes and fees that would have been paid by a licensed sportsbook.

Numbers and facts

The lawsuit contains specific allegations regarding the company's timeline and target demographics. According to the complaint, Kalshi has offered unlicensed sports wagering in Connecticut since January 2025. A particularly concerning point is that the platform allowed users aged 18 to 20 to trade sports contracts, despite the state’s legal betting age of 21. The state alleges that Kalshi targeted younger audiences through paid influencers and college ambassador programs.

Furthermore, the state argues that Kalshi lacks mandatory responsible gaming tools. Unlike licensed operators, the platform does not offer self-exclusion options. It also fails to meet financial auditing, account security, and integrity monitoring standards required for regulated sportsbooks. The company's marketing is also under fire for presenting sports contracts as investments and falsely claiming they are legal nationwide.

„Sports event contracts are no different than sports betting and are not magically shielded by federal law from Connecticut’s commonsense consumer protection laws.“ - William Tong, Attorney General of Connecticut

Background

The conflict began in December 2025 when the DCP issued cease-and-desist letters to Kalshi and other platforms like Robinhood and Crypto.com. Kalshi fought back in federal court, arguing that its event contracts fall under the Commodity Exchange Act and the exclusive jurisdiction of the CFTC. However, U.S. District Judge Vernon D. Oliver denied Kalshi’s request for a preliminary injunction earlier this month, concluding that the contracts are, at their core, sports wagers.

Other states are following suit. In Utah, Governor Spencer Cox has expressed fierce opposition, questioning the CFTC's authority over sports derivatives like LeBron James' rebounds. While Kalshi continues to raise significant capital, including a $1 billion round led by investors like Sequoia Capital and Andreessen Horowitz, the resistance from state gambling regulators is intensifying nationwide.

Why it matters for German players

For players in Germany, this US legal battle serves as a cautionary tale regarding the importance of clear regulation. In Germany, the legal framework is strictly defined by the State Treaty on Gambling 2021 (GlüStV 2021). Any operator wishing to offer sports betting or online slots must obtain a license from the Gemeinsame Glücksspielbehörde der Länder (GGL). Prediction markets trying to disguise bets as financial products would struggle to gain legal approval in Germany without meeting rigorous player protection standards.

German users should ensure they only play at sites listed on the official GGL whitelist. These operators adhere to the 1,000 Euro monthly deposit limit and are connected to the LUGAS central monitoring system. Platforms that attempt to bypass age restrictions or player protection measures, as Kalshi is accused of doing in Connecticut, are considered illegal in Germany. Aggressive marketing to minors would lead to an immediate revocation of any German license.

What it means for GGL-licensed casinos

Licensed GGL casinos and bookmakers in Germany benefit from the legal certainty that these US lawsuits highlight. While the US face a complex mix of state and federal laws, the GlüStV 2021 provides a clear structure for consumer protection. German providers must implement features like the panic button and reality checks, which foster player trust. The Kalshi case demonstrates that regulators worldwide are becoming stricter against gray market offerings that try to evade gambling oversight by re-labeling their products.