Connecticut Judge Rejects Kalshi Claims on CEA Swaps and State Preemption in Sports Betting Dispute

A federal judge denied prediction market operator Kalshi an emergency injunction that would have blocked Connecticut from enforcing its sports betting laws. Judge Vernon D. Oliver ruled the company’s sports event contracts fall outside the Commodity Exchange Act definition of a swap and that state authority is not preempted. The August 10 decision is the ninth state-level ruling to curb Kalshi’s operations.

According to reporting by InGame, Oliver addressed both core legal questions even though a ruling on either would have sufficed. The opinion tracks similar recent state victories and leaves Kalshi facing enforcement unless a stay is granted on appeal.

Contracts Fail Statutory Swap Tests on Multiple Grounds

Oliver held that Kalshi’s products do not depend on the “occurrence, nonoccurrence, or the extent of the occurrence” of an event. He wrote that a boxing match is the event, but its winner is the result, not a separate contingency. “Kalshi’s sports-event contracts fail to satisfy this portion of the statutory definition of a swap because they do not depend on whether an underlying sporting event occurs, fails to occur, or occurs to a particular extent.”

The contracts also lack consequences “embedded within” the event itself. Oliver rejected Kalshi’s broad reading of economic or commercial effects, noting it “knows no limiting principle.” He added that the CEA requires swaps to trade on designated contract markets and serve risk-management functions, neither of which applies here. The ruling echoes an earlier Nevada decision against Crypto.com sports contracts.

Preemption Rejected and Licensing Path Noted

Even assuming the contracts qualified as swaps, Oliver found no field or conflict preemption. He cited CEA text preserving state jurisdiction and Congress’s explicit preemption clauses for other products, concluding lawmakers did not intend to strip states of historic police powers over sports betting and hand them to the CFTC.

Oliver observed Kalshi could in theory obtain a sublicense from Connecticut’s tribal or lottery operators, though the exclusive framework makes it difficult. Legal observer @WALLACHLEGAL stated on X: “The judicial rulings in the prediction market cases are clearly becoming even more one-sided for the States lately. New York, Utah, Michigan, and Connecticut rejected every single PM argument across the board.” Kalshi is expected to appeal and seek emergency relief.

Where the Risk Lies

The pattern of district court losses increases pressure on Kalshi to secure favorable appellate precedent before more states act. Regulators gain clarity that sports outcome contracts remain subject to local licensing, while operators must weigh the cost of prolonged litigation against the narrow path for federal preemption.

Reporting: InGame

Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.