Kalshi Sports Betting Lawsuit Alleges Prediction Market Violates Connecticut Gambling Laws

Lawsuits brought against other sports betting sites like DraftKings and FanDuel allege online wagering platforms are contributing to gambling addiction, particularly among younger users.

Connecticut has filed a lawsuit seeking to stop the prediction market Kalshi from offering sports event contracts to residents of the state, alleging it is actually operating an illegal, unlicensed sports betting platform.

The complaint (PDF) was brought by the State of Connecticut in Connecticut Superior Court on August 26, naming KalshiEX LLC as the sole defendant.

Kalshi has allegedly offered sports wagers to Connecticut residents since January 2025 through its website, app and other channels, yet the state maintains the platform has never held or attempted to obtain the license required to offer sports wagering in its jurisdiction.

Online Sportsbooks and Prediction Markets

Following a 2018 U.S. Supreme Court decision that paved the way for states to legalize sports betting, a number of traditional sportsbooks have begun operating online.

Platforms such as DraftKings and FanDuel have introduced millions of younger adults to the ability to place bets from their smartphones at any time of day. However, that rapid expansion has also helped fuel a wave of sports betting addiction lawsuits alleging the companies promoted addictive gambling behavior and failed to protect vulnerable users.

Connecticut legalized sports betting in 2021, but online wagering in the state generally must operate through one of three master wagering licensees: the Mashantucket Pequot Tribe, Mohegan Tribe and Connecticut Lottery Corporation, or licensed entities operating on their behalf.

Billing itself as a “prediction market,” Kalshi claims it does not fall under that purview, allowing users to buy and sell “event contracts” based on whether future events will occur. The platform offers contracts involving sports, elections, weather, interest rates and other subjects, characterizing the transactions as financial products rather than conventional wagers.

Kalshi Sports Betting Allegations

In the complaint, Connecticut maintains Kalshi’s sports event contracts are simply “sports wagers under another name,” offering bets on game and series winners, season win totals, league rankings, points scored and individual player statistics, as well as “combos,” which the state describes as essentially parlays. For its part, Kalshi argues its contracts are federally regulated derivatives under the Commodity Exchange Act and cannot be regulated or prohibited by individual states such as Connecticut.

According to the lawsuit, the Connecticut Department of Consumer Protection sent Kalshi and other prediction-market providers cease-and-desist letters in December 2025. In response, Kalshi filed a federal lawsuit seeking to prevent state officials from enforcing Connecticut gambling laws. On August 7, a federal judge denied Kalshi’s request for a preliminary injunction.

The filing notes that courts in several other states, as well as the Sixth Circuit, have similarly rejected Kalshi’s argument that federal law shields its sports contracts from state gambling regulations.

Connecticut also alleges Kalshi operates outside consumer safeguards imposed on licensed sportsbooks, including a state law prohibiting sports betting by anyone under 21. Kalshi allegedly allows individuals 18 and older to create accounts and wager on sporting events, meaning some high school students may qualify for accounts despite being too young to legally gamble in Connecticut.

The complaint further accuses Kalshi of marketing to individuals under 21 and paying minors to create promotional content. Specifically, the state claims Kalshi briefly used a 15-year-old video game streamer as an affiliate and promoted an ambassador program targeting students at Yale and other universities.

Connecticut also claims Kalshi deceptively represented its sports contracts as legal nationwide. The complaint reproduces an advertisement describing Kalshi as “The First Nationwide Legal Sports Betting Platform.”

Moreover, the state alleges Kalshi uses investment terminology such as trading, financial strategy, price fluctuations and market risk to advertise its contracts. Connecticut argues that language misleadingly portrays risky sports wagers as investment products that may provide financial security.

“Kalshi often implies in its advertisements that users have a greater chance of winning compared to sportsbooks participating in the regulated marketplace, in violation of Connecticut’s advertising and marketing requirement that master wagering licensees not imply greater chances of winning compared to other licensees.”

— State of Connecticut vs. KalshiEx LLC

The lawsuit raises allegations of unfairness, illegal sports wagering, underage gambling and deception. It seeks injunctive relief under Connecticut’s sports wagering laws, for the court to permanently prevent Kalshi from offering unlicensed sports wagering in the state, restitution for consumers, civil penalties and disgorgement of revenues and profits.

Online Sports Betting Lawsuits

Connecticut’s concerns about prediction markets like Kalshi come amid a growing number of DraftKings lawsuits and FanDuel lawsuits filed over allegations that online wagering platforms contributed to gambling addiction, particularly among younger users.

Many claims allege the platforms used algorithms to identify customers who showed signs of compulsive gambling and then targeted them with personalized promotions, loyalty rewards and, in some cases, dedicated account representatives. The lawsuits maintain these practices encouraged continued wagering while minimizing the financial risks associated with gambling.

Amid the growing litigation, gambling addiction lawyers are reviewing potential claims for individuals who suffered substantial financial losses through sports betting and other online wagering platforms.

Individuals who believe they may qualify for a sports betting addiction lawsuit can submit information for a free legal review. Claims are handled on a contingency fee basis, meaning there are no upfront costs and attorneys are paid only if compensation is obtained through a settlement or verdict.

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