Connecticut joins several other states in regulating Kalshi as concerns that sports event contracts resemble traditional sports wagering are rising.
Connecticut Department of Consumer Protection Opens Investigation Into Kalshi
Kalshi is now being investigated by the Connecticut Department of Consumer Protection. According to Kaitlyn Krasselt, a spokesperson for the regulator, Kalshi is suspected of operating in violation of Connecticut law. However, Krasselt explained that she is not capable of providing additional information currently.
Kalshi is a platform that allows people to trade prediction contracts tied to the outcomes of real-world events. Essentially, users can buy and sell contracts that pay out based on whether specific events occur, such as election results, economic indicators, weather events, and more. These prediction markets function similarly to financial markets, but instead of trading stocks or bonds, participants speculate on the likelihood of certain events occurring.
However, states with legalized sports betting are now raising concerns that sports event contracts resemble traditional sports wagering too closely. There are also ongoing worries about election-related contracts, which likely prompted Connecticut to launch an investigation last fall.
Connecticut now joins a growing number of states that are taking a closer look at Kalshi. In March, Nevada and New Jersey, two of the US’s oldest gambling markets, issued cease-and-desist orders to the platform. They were joined by Ohaio on Monday when the state regulator issued cease-and-desist notices over sports contracts to Kalshi, as well as Robinhood and Crypto.com.
Kalshi Has Grown Significantly Recently
Prediction markets have gained significant popularity since the 2024 US presidential election, with companies like Kalshi branching out into sports events. The company has generated more than $320 million in trading volume from the outcome of the men’s March Madness championship alone, according to its website. March Madness is considered one of the largest sports betting events in the US each year.
While sports gambling is restricted to the 39 US jurisdictions where it has been legalized and regulated, Kalshi’s sports predictions are available in all 50 states. These sports predictions pose both a significant threat and opportunity for betting operators, some of whom have shown interest in them and are likely monitoring Kalshi’s regulatory struggle closely.
For their part, Kalshi have not stayed silent as the company has filed lawsuits against regulators in Nevada and New Jersey in response to the cease-and-desist orders. The company argued, in part, that it operates as a “federally regulated exchange” overseen by the Commodity Futures Trading Commission, which holds exclusive authority to approve or reject its event contracts, according to a court filing from March 28.
According to James Kilsby, chief analyst at Vixio, a regulatory tech company that works with the gambling industry, this is a landmark legal battle that pits states’ traditional authority over gaming and sports betting against the question of whether commodities exchanges regulated by the Commodity Futures Trading Commission can offer sports betting-like products. The case raises important questions about the scope of federal versus state control in this area.