Connecticut Federal Judge Rules CFTC Lacks Authority to Override Court in Kalshi Dispute

A Connecticut federal judge has denied prediction market operator Kalshi‘s emergency motion for an injunction pending appeal. U.S. District Judge Vernon D. Oliver ruled the Commodity Futures Trading Commission (CFTC) cannot issue orders that conflict with the court’s prior decisions on the status of the company’s sports event contracts.

Oliver’s denial comes five days after his Aug. 10 ruling that those contracts are not swaps and fall outside the CFTC‘s exclusive jurisdiction. It represents the first judicial response to the CFTC‘s intervention in Kalshi‘s legal battles with state regulators, according to reporting by Gambling Insider.

Court Finds No Basis to Reconsider State Law Complement to Federal Rules

Kalshi cited the CFTC‘s Aug. 11 market emergency order, issued after New York Attorney General Letitia James sued to halt event contracts there. That order directed Kalshi to “continue to perform its functions as an exchange in accordance with the CEA’s Core Principles and its normal practices,” even if a state court required it to stop.

The company argued the directive created an irreconcilable conflict that “literally requires Kalshi to refrain from following state law.” Oliver rejected the position. “This argument is not compelling, as it ignores a fundamental holding of the PI Order: that the sports-event contracts in dispute are not swaps subject to the CFTC’s exclusive jurisdiction,” he wrote.

Oliver added that “Nothing in the CEA takes away statutory interpretation from the Courts, and as an administrative agency, the CFTC lacks the authority to dictate an order that conflicts with this Court’s decision.” The emergency order did not alter his view that Kalshi failed to make the required strong showing of success on the merits.

Speculative Harm and State Interests Weigh Against Injunction

The court also held that the CFTC action did not strengthen Kalshi‘s claims of irreparable harm from potential civil or criminal liability under state law or from economic and reputational damage if it ceased trading for Connecticut customers. Oliver noted any CFTC enforcement for compliance with state laws remains “speculative.”

Connecticut officials had refrained from enforcement during the initial injunction proceedings. The judge found the state presented a compelling argument that it, not Kalshi, would suffer irreparable injury if barred from applying its gambling laws, consistent with Supreme Court precedent on state enforcement interests.

This decision leaves Kalshi exposed to state enforcement during its Second Circuit appeal. Courts are signaling that agency emergency measures will not automatically displace judicial readings of the statute on preemption questions.

Reporting: Gambling Insider

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