Connecticut Sues Kalshi and Asks for Every Dollar It Took in the State

Sixteen days after beating Kalshi in federal court, Connecticut filed its own verified complaint in Hartford. The cease and desist asked the exchange to stop. This asks it to pay back what it has already earned.

• Connecticut Attorney General William Tong and Department of Consumer Protection Commissioner Bryan T. Cafferelli filed a verified complaint against KalshiEX LLC in Hartford Superior Court on Wednesday, 26 August, seeking to bar the exchange from offering sports wagering in the state without a licence
• The state is asking for civil penalties, restitution and disgorgement of revenue it says was earned unlawfully, a materially wider claim than the cease and desist the Department of Consumer Protection issued to Kalshi, Robinhood and Crypto.com in December 2025
• It follows Judge Vernon D. Oliver's ruling that sports event contracts are not swaps under the Commodity Exchange Act and that states retain their police powers over sports wagering regardless
• The complaint names the exchange's parlay-style "combo" products alongside contracts on match winners, point spreads, season win totals, league placings and individual player statistics
• Kalshi, which was denied relief pending appeal and has taken the case to the Second Circuit, called the suit the latest in a line of arbitrary and inconsistent enforcement

The State That Won on Defence Has Switched to Attack

Connecticut's Department of Consumer Protection opened this dispute in December 2025, ordering Kalshi, Robinhood and Crypto.com to stop advertising, promoting or offering sports event contracts to state residents. Cafferelli's position then was narrow and jurisdictional: only licensed entities may offer sports wagering in Connecticut, none of the three held a licence, and the contracts breached other state rules besides, including the prohibition on wagering by anyone under 21.

Kalshi sued the state in the District of Connecticut the following day, arguing that the Commodity Exchange Act places its contracts under the exclusive supervision of the Commodity Futures Trading Commission and that its status as a designated contract market since 2020 displaces state gambling law entirely. On 10 August, Oliver denied the preliminary injunction. He held that the contracts turn on outcomes and in-game occurrences rather than on whether an underlying event happens at all, so treating those outcomes as separate events would depart from the ordinary meaning of the statute. He added that even if they were swaps, sports wagering has long sat within the states' police powers.

Wednesday's filing inverts the posture. Tong and Cafferelli are now the plaintiffs, in state court rather than federal, and the relief they want goes well beyond an order to stop. According to the complaint, the state is seeking a permanent injunction against unlicensed sports wagering, civil penalties, restitution to consumers, and disgorgement of the revenue Kalshi has taken from Connecticut residents since the contracts launched.

Tong said sports event contracts are no different from sports betting and are not magically shielded by federal law from Connecticut's consumer protection laws. Governor Ned Lamont, appearing alongside him, said the markets put consumers, young people, student athletes and people with gambling problems at serious risk, and that the goal in licensing the state's market had been a safe and regulated one rather than a free-for-all. Cafferelli said the platforms have been running a coordinated campaign to convince people they are offering investments that are somehow safe, when they are indistinguishable from sports wagering.

Kalshi's Jovy Dedaj described the action as the latest in a line of arbitrary and inconsistent enforcement. The company's federal appeal is pending before the Second Circuit, and it has not withdrawn from Connecticut.

Disgorgement Is the One Remedy Kalshi Cannot Geofence Away

Every state remedy so far has been forward-looking, and Kalshi has shown it can absorb forward-looking remedies. When Washington threatened $120,000 a day, the exchange switched the state off rather than accrue the penalty, and the meter stopped. Nevada produced a settlement and a geofence. Those outcomes cost Kalshi a market but left the revenue it had already booked untouched, which is why operating while litigating has been a rational strategy: the downside was capped at the point of exit. Disgorgement removes the cap. It reaches backwards to the launch of the contracts and it does not care whether Connecticut is geofenced tomorrow. New York's suit already sought fines and full restitution on the same logic. If Connecticut succeeds, the calculation every state-by-state exit has rested on stops working, because leaving no longer settles the bill.

A Judicial Finding Is Worth More Than a Cease and Desist

The December order was an assertion by a regulator. The August ruling is a reasoned decision by a federal judge that Kalshi's central legal theory fails, and Connecticut now gets to plead from it rather than argue towards it. That is a meaningful difference in a state court that will be asked whether unlicensed sports wagering occurred. It is not decisive, since a preliminary injunction denial is not a final judgment on the merits and the Second Circuit could yet reverse, but the ordering matters: the state waited until it had a ruling in hand before it sued. Compare the states that filed first and litigated the preemption question inside their own enforcement actions, and Connecticut's sequencing looks deliberate rather than opportunistic.

Removal Is the Obvious Next Move and the Least Useful One

Kalshi's instinct throughout has been to get every dispute in front of a federal judge, and a defendant asserting Commodity Exchange Act preemption has a natural argument for removing a state case. The difficulty is that the federal judge with jurisdiction over Connecticut has already read the statute and rejected the reading. Winning the venue fight would return the exchange to the courtroom where its theory has already failed once, and would do nothing about the disgorgement claim on the merits. The more consequential venue remains the Second Circuit, where the question of whether federal derivatives law displaces state gambling law is squarely presented, and which is one of the several routes by which this reaches the Supreme Court.

Connecticut spent nine months defending an order. It has now asked a court to make the exchange pay for the period in which it ignored one.