Connecticut Issues Cease-and-Desist Order to Prediction Markets, but Federal Court Issues Injunction

The legal war between state gaming regulators and prediction market platforms offering sports event contracts continues to rage. Connecticut gaming authorities issued a cease-and-desist order to several prediction market platforms, but the industry leader, Kalshi, won a pause in the directive by a federal court judge.

Connecticut Slaps C&D Order on Prediction Market Platforms

Kalshi has seen this movie before from other state regulators issuing cease-and-desist orders to prevent firms like it from offering sports event trading contracts in their jurisdictions. Last week, Connecticut’s Department of Consumer Protection (DCP) became the latest agency to slap Kalshi, Robinhood, and Crypto.com with C&Ds to prevent those operators from muscling in on the sports betting market in the Constitution State.

DCP Gaming Director Kris Gilman said, “[Prediction markets operate] outside of a regulatory environment, posing a serious risk to consumers who may not realize wagers placed on these illegal platforms offer no protections for their money or information. A prediction market wager is not an investment.”

Regulators Cite Licensing and Consumer Safeguards

According to the DCP and other regulators throughout the nation, like the Nevada Gaming Control Board (NGCB), only licensed sports betting operators have been vetted, which provides consumers with protections and remedies should disputes occur.

But more importantly, those operators pay taxes on their revenues to the state, while prediction markets do not, as they have argued that they fall under the regulatory authority of the Commodity Futures Trading Commission (CFTC), which is a federal agency.

Kalshi Responds

Kalshi is familiar with this legal territory and immediately sought relief from a federal court to stop the cease-and-desist order. As argued before, Kalshi believes its contracts are federally regulated derivatives, and its license falls under the authority of the CFTC, not state gaming regulators.

In addition to the cease-and-desist order, the DCP also instructed that all funds presently held from Connecticut customers be returned and that failure to comply would violate the Connecticut Unfair Trade Practices Act and could lead to criminal penalties under state gaming laws.

Federal Court Halts Enforcement

Once again, Kalshi and its competitors found a mostly friendly legal venue with the feds, and U.S. District Judge Vernon Oliver ordered a halt to the DCP’s cease-and-desist order. However, the remedy is only temporary until both sides can present arguments, with the DCP instructed to issue its response by January 9th, while Kalshi has until January 30th to reply.

“Per the parties’ joint stipulation, the Court orders Defendants to refrain from taking enforcement action against Kalshi regarding any conduct described in the Cease and Desist Letter dated December 2, 2025, pending the Court’s disposition of Plaintiff’s motion for a preliminary injunction,” the court wrote.

A pivotal February 12th hearing is scheduled for both sides to argue their sides, and it will be then that the prediction market will gain more legal clarity. Many believe this is an issue that will ultimately be elevated to the Supreme Court by whichever side is on the losing end of the argument.