A federal judge in Connecticut has rejected prediction-market operator Kalshi’s bid for emergency protection from state gambling enforcement, determining that the company’s sports-related event contracts do not meet the legal definition of swaps under federal commodities law.
As a result, the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction never applied to them.
US District Judge Vernon D. Oliver issued the ruling on August 10, 2026, denying KalshiEX LLC’s request for a preliminary injunction against Connecticut Department of Consumer Protection officials.
The decision also rejected a parallel request from Coinbase Financial Markets.
Oliver concluded that Kalshi was unlikely to succeed on the core claims that its products fall under federal preemption.
The dispute began after Connecticut regulators sent Kalshi a cease-and-desist letter in December 2025.
Officials argued the platform was offering unlicensed online sports wagering through contracts that let users take positions on game results, team advancement, or championship winners.
Kalshi sued, contending that because it operates as a CFTC-registered designated contract market, federal law bars the state from regulating its offerings.
Oliver’s analysis started with a threshold question: whether the sports contracts even qualify as swaps under the Commodity Exchange Act.
He held they do not. The statute defines certain swaps by reference to the occurrence, nonoccurrence, or extent of an event.
According to the judge, this language addresses whether an underlying event takes place and to what degree, not the specific outcomes or discrete moments within a sporting contest.
Kalshi’s contracts, by contrast, turn on results such as which team wins or particular in-game occurrences.
Treating those results as separate “events,” Oliver wrote, would stretch ordinary meaning.
He further found the contracts lack the required association with potential financial, economic, or commercial consequences inherent to swaps.
Sports contests primarily serve entertainment purposes, and Kalshi itself had previously acknowledged in other litigation that contracts tied to games generally do not serve commercial or hedging interests.
Because the instruments are not swaps traded on a designated contract market, the CFTC’s exclusive jurisdiction never attached.
Oliver emphasized that courts, not the agency alone, determine the meaning of “swap.”
He noted the CFTC had never subjected any of Kalshi’s sports contracts to review under its special public-interest rule, even though sports products accounted for 80 to 90 percent of the platform’s listings and revenue.
At the time of earlier hearings, Kalshi was valued near $11 billion and counted roughly 24,000 users in Connecticut.
Although the finding that the contracts are not swaps resolved the motion, Oliver addressed preemption arguments in the alternative and rejected them as well.
He found neither express field preemption nor conflict preemption.
State gambling rules, he concluded, can coexist with federal commodities oversight and serve complementary public-interest goals rooted in traditional state police powers over wagering.
The ruling does not itself order enforcement action, but it clears the way for Connecticut to pursue its regulatory authority.
It adds to a patchwork of district-court decisions examining whether prediction-market sports products are financial instruments or regulated gambling.
Kalshi and similar platforms have secured mixed results elsewhere, with some courts accepting broader interpretations of event contracts and others aligning more closely with state views.
The decision underscores ongoing tension between innovative event markets and longstanding state control of sports wagering. Further appeals or legislative clarification may eventually resolve the national picture, but for now Connecticut regulators retain the ability to treat these contracts as subject to local licensing and gambling statutes.