Add Connecticut to the growing list of states that has a court battle with Kalshi.
The Connecticut Department of Consumer Protection’s (DCP) Gaming Division, which regulates gaming in the state, sent cease and desist letters to Robinhood, Kalshi and Crypto.com on Dec. 2, informing all three that the government group believes the sports-related event contracts they offer to be in violation of state gaming law.
“Only licensed entities may offer sports wagering in the state of Connecticut,” said DCP Commissioner Bryan T. Cafferelli said in a press release from the regulator about the cease and desist letters. “None of these entities possess a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”
Kalshi filed the suit the day after C&D letter
Kalshi responded by filing a lawsuit against the regulator in Connecticut District Court and seeking an injunction barring the enforcement of the cease and desist the very next day. To date, Crypto.com and Robinhood have not filed similar legal action.
As it has argued in several other states, Kalshi’s suit says that the Commodity Exchange Act (CEA) preempts state gaming laws and the regulation of all of its even contracts is the sole jurisdiction of the Commodity Futures Trading Commission (CFTC).
It also put forth an argument it is making in its court battle against the Massachusetts Gaming Commission (MGC) that suggests what the regulator is asking for would offline every contract being offered on Kalshi’s site.
Kalshi claims Connecticut concerned with more than sports
The lawsuit references the language of the cease and desist letter, particularly how Connecticut statute define “gambling”.
“Setting aside Kalshi’s sports-event contracts, DCP’s cease-and-desist letter suggested that all of Kalshi’s event contracts are unlawful because Connecticut law ‘prohibits gambling,’ defined as ‘risking any money, credit, deposit or other thing of value for gain contingent in whole or in part upon lot, chance or the operation of a gambling device,’ and Kalshi’s actions do not ‘fall within any of the excepted activities to the prohibition on gambling,'” the filing argued.
However, the letter from DCP seems to only be concerned with sports contracts.
“The Department of Consumer Protection (‘Department’) has become aware that KalshiEX LLC, d/b/a Kalshi (“Kalshi”), is conducting unlicensed online gambling, more specifically sports wagering, in Connecticut through its online sports event contracts,” the letter reads.
It goes on to detail how state statute defines sports wagering in particular and makes no specific mention of any contracts beyond those pertaining to sports that the regulatory body takes issue with.
Kalshi making more arguments about state gambling statutes
Kalshi made a similar argument in its response to the lawsuit filed against it in Massachusetts. While Attorney General Andrea Campbell’s lawsuit against the firm focuses on sports contracts, Kalshi zeroed in on a part of the Massachusetts sports betting statute that references wagering on “other events” and argued that enforcement of the statute would offline every contract Kalshi has to offer, not just sports-related ones.
Given that in the lawsuits so far the judges have been looking at a very narrow field of just sports contracts and whether or not state laws or federal laws prevail. However, with these interpretations of state statutes and definitions of gambling to include much broader terms, Kalshi is making the argument that a much wider swath of financial swaps could be impacted if state law is enforced at the expense of the CEA.
