District Court Denies Prediction Markets' Injunction Bids to Block Connecticut Gambling Laws

The U.S. District Court for the District of Connecticut denied preliminary injunction motions by KalshiEX LLC and Coinbase Financial Markets, Inc., ruling that sports-event contracts are likely not federally regulated swaps and that the state's gambling laws are not preempted.

Kalshi and Coinbase had sought to bar the state Attorney General and Department of Consumer Protection from enforcing gambling laws against their platforms. The court found they were unlikely to succeed on the merits, holding that contracts tied to a sporting event's outcome or discrete occurrences within it do not meet the Commodity Exchange Act definition of a swap, since they do not hinge on the occurrence, non-occurrence, or extent of an underlying event with an inherent financial, economic, or commercial consequence.

Even assuming the contracts were swaps, the court held Connecticut's gambling statutes would survive both field and conflict preemption. It pointed to the CEA's savings clause preserving state regulatory authority and its "Special Rule" letting the CFTC bar event contracts involving gaming or activity unlawful under state law as evidence Congress did not intend to displace states' traditional police power over gambling.

The court also found no irreparable harm, deeming the claimed injuries largely monetary, speculative, or self-inflicted, and concluded the balance of equities and public interest favored Connecticut given its consumer-protection and gaming-enforcement interests. It noted federal courts nationwide are split on Kalshi's parallel suits against other states, while every state court addressing the issue has ruled against Kalshi.

A single district judge issued the ruling, with no dissent. In the companion case, Coinbase Financial Markets, Inc. v. Tong, before the same judge, the court separately denied Coinbase's preliminary injunction motion.