Kalshi has been dealt another setback in Connecticut, this time with federal judge Vernon D. Oliver ruling that the Commodity Futures Trading Commission (CFTC) cannot dictate an order that conflicts with the court’s own interpretation of federal law.
The CFTC, said the judge, lacks the authority to override the court’s reading of federal law when it comes to resolving the conflict between Kalshi’s obligations and Connecticut’s gaming statutes.
CFTC and Connecticut Judge Clash Over Federal Regulation
US District Judge Oliver’s ruling comes five days after he denied Kalshi’s request for a preliminary injunction in a separate ruling on August 10, in which he found that Kalshi’s sports-event contracts do not qualify as swaps under the Commodity Exchange Act and therefore do not fall under the CFTC’s exclusive jurisdiction, meaning Connecticut’s gambling laws could stand.
This second ruling was prompted by the CFTC’s own intervention: after New York Attorney General Letitia James sued Kalshi in state court, the CFTC issued a “market emergency” order on August 11, directing Kalshi to continue operating as an exchange in line with its normal practices regardless of any state court ruling against it.
Kalshi seized on that order as new grounds for an emergency injunction, arguing it proved that complying with state gaming laws would conflict with its obligations as a federally regulated exchange. In fact, said the platform, federal law required it to defy any state gaming rulings.
Judge Oliver disagreed, finding that the CFTC order did not materially change his earlier analysis and did not indicate any intent by the CFTC to take regulatory action against Kalshi itself.
No Irreperable Harm Found, Judge Says
The judge also refused to agree with Kalshi’s other line of defense, that shuttering its prediction markets under state gaming laws would lead to irreparable harm, something that was not proven in the proceedings. Kalshi argued that by enforcing state gambling laws, it was left liable to criminal and civil action, and could thus face reputational harm, but this argument too was deemed speculative rather than concrete.
Sports-event contracts are central to the stakes here: as of the earlier February hearing, they accounted for between 80% and 90% of both Kalshi’s listed contracts and its overall revenue, with the company then valued at roughly $11 billion.
Kalshi has been facing legal action all over the country, with proceedings underway in New York, Washington, Nevada, and elsewhere. In Nevada, the Gaming Control Board has pushed for the company to be fined $120,000 a day for failing to fully geofence the state and stop offering its event contracts to Nevada residents, after investigators repeatedly found they could still access prohibited contracts from inside the state despite a court-ordered deadline.