Kalshi has launched a lawsuit against the state of Connecticut, hours after the Department of Consumer Protection ordered it, Robinhood, and Crypto.com to stop offering unlicensed prediction market services.
The move is part of a broader wave of developments in the controversial sector this week.
Connecticut’s cease-and-desist letters accuse the platforms of running illegal sports betting and warn they pose a “serious risk” to consumers.
The letters demanded immediate shutdown and the return of customer funds.
“These platforms are deceptively advertising that their services are legal, but our laws are clear,” said Department of Consumer Protection Gaming Director Kris Gilman.
“They are also operating 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.”
Kalshi’s lawsuit in the US District Court for the District of Connecticut mirrors actions it has filed in Maryland, Nevada, New Jersey, New York, and Ohio after regulators issued similar orders.
The platform argues that it is federally regulated by the Commodity Futures Trading Commission and is therefore allowed to operate event trading markets nationwide.
Legal Battles Across the States
Legal scrutiny of prediction markets continues across the United States.
In New York, a class action lawsuit was filed against Kalshi this week.
Nevada has seen intense litigation, with a federal judge recently overturning an injunction that had temporarily blocked the state from enforcing its gambling rules against Kalshi.
Massachusetts is preparing for a prediction market hearing next week, following a lawsuit from Attorney General Andrea Campbell seeking to halt sports event markets.
Tribal authorities in California and Wisconsin have also entered the debate, citing potential violations of the Indian Gaming Regulatory Act.
A California judge recently sided with Kalshi, ruling that CFTC oversight means its contracts are not considered wagers.
Kalshi and Polymarket Expand Amid Regulatory Pressure
Kalshi recently closed its third fundraising round of the year, raising $1 billion and achieving an $11 billion valuation.
Investors include Sequoia Capital, Andreessen Horowitz, Meritech Capital, IVP, ARK Invest, Anthos Capital, CapitalG, and Y Combinator.
“We’re in a massive market with a massive opportunity,” said Kalshi CEO Tarek Mansour. “We have to scale up to rise to that opportunity.”
This funding more than doubles the $5 billion valuation from October.
Kalshi has also partnered with CNN and CNBC to deliver real-time insights, with CNBC’s KC Sullivan noting, “Kalshi’s data will serve as a powerful complement to CNBC’s reporting and help people stay better informed about the world around them.”
Polymarket, after its own multibillion-dollar fundraising earlier this year, has begun a limited rollout to over 200,000 US users.
NFL Stays Cautious
While the NHL has partnered with both Kalshi and Polymarket, NFL Commissioner Roger Goodell signaled the league will remain cautious.
“That’s not something we’re about to enter into. We are going to see how things play out, both from a regulatory standpoint. There are a lot of legal challenges going on right now,” Goodell said.
He emphasized that the NFL takes brand risk seriously and will wait until regulatory clarity emerges before pursuing prediction market involvement.
