Kalshi and Coinbase Lose Connecticut Gambling Ruling

A federal judge in Connecticut refused on August 10, 2026 to shield Kalshi or Coinbase from state gambling law, holding that a CFTC licence does not displace a state's power to regulate wagering. The 38-page opinion closes by adopting a Nevada federal court's line: "Kalshi characterizes its sports-related event contracts in various ways, but at bottom, they are sports wagers." Both exchanges have since appealed, and the same judge refused to let either keep trading while they do - Kalshi on August 15, Coinbase on August 18.

This is a prediction-market ruling, not a sweepstakes one, and it still belongs on your radar. The argument the court rejected is the same argument sweeps operators have started using to get out from under state bans.

What did the Connecticut court decide?

Judge Vernon D. Oliver denied KalshiEX LLC's motion for a preliminary injunction against the Connecticut Department of Consumer Protection, its commissioner Bryan T. Cafferelli, gaming director Kristofer Gilman, and Attorney General William Tong. The opinion is dated August 7 and was entered on the docket on August 10. A companion order the same day denied Coinbase Financial Markets the same relief against the same officials, "largely in line with the Court's companion order," in a case where Coinbase acts as an intermediary listing Kalshi's contracts.

Every factor went against the exchanges. On the merits the court found no preemption of any kind, holding "that Connecticut's gambling laws complement rather than conflict with federal law."

The reasoning turns on a provision of the Commodity Exchange Act that is worth knowing by name, because it keeps deciding these cases. Under the Special Rule at 7 U.S.C. § 7a-2(c)(5)(C), the CFTC may prohibit an event contract that is "contrary to the public interest" where it involves "activity that is unlawful under any Federal or State law" or "gaming." Congress writing state law and gaming into a federal statute means the provision's "plain text clearly reflects an affirmative intent to preserve state laws governing whether particular conduct is lawful or unlawful" - a line the Connecticut court took from a Maryland federal ruling and adopted as its own.

The closing line is the one that will get quoted. Congress did not, the court wrote, vest authority over sports wagering in "an agency that has not historically regulated sports wagering and has not exercised meaningful oversight over Kalshi's sports event contracts."

Why does a prediction-market ruling matter to sweepstakes players?

Because operators have started using this exact escape route out of sweepstakes bans, and it is losing more often than it wins.

Novig retired both of its sweepstakes currencies on August 4 and converted remaining Novig Cash balances to US dollars when it relaunched through a CFTC-designated exchange. Within three days it had sued New York, then Massachusetts, Washington and New Mexico, then moved for emergency relief in New York, where a judge refused its restraining order on August 11. Wisconsin followed on August 14, its fifth state in ten days. The legal theory in all of those complaints is the theory Connecticut has now rejected in 38 pages.

It is also the third straight loss in a week.

1. August 4, Utah. The court entered judgment against Kalshi.
2. August 6, Michigan. Coinbase was denied an injunction.
3. August 10, Connecticut. Both exchanges denied, in the two orders above.

We covered the Utah and Michigan rulings when they landed.

One thing the opinion is careful about, and we should be too: the federal courts have not been unanimous. The Connecticut judge catalogues 14 suits Kalshi has brought against states in federal court and notes that some of those courts granted Kalshi preliminary injunctions while others refused. The unbroken run is on the other side of the courthouse. "In contrast to the federal courts that have addressed this issue," the opinion records, "every state court to have issued a ruling has ruled against Kalshi." A King County judge in Washington has since added another, rejecting the Commodity Exchange Act argument and ordering Kalshi to geofence the state by August 19. Anyone telling you this question is settled, in either direction, is ahead of the record.

For a player, the takeaway is not about Kalshi. It is that a federal registration on an operator's homepage is not a promise your state will leave the product alone, any more than a sweeps casino's terms page is. If you play in a state that has banned this category, the enforcement risk to the operator is real, and operator enforcement risk is how players end up with as little as 14 days to move a balance, on a deadline the operator sets rather than the statute. Our guide to how sweeps coin redemption works sets out the play-through and verification steps that make a 14-day window shorter than it looks.

Which states have already acted against Kalshi?

The opinion catalogues them, with dates.

Four civil enforcement actions brought by states remain pending in state court after being remanded, in Nevada, Washington, Massachusetts and Michigan. The August 12, 2026 date in the Nevada and Michigan rows has now passed. What happened on the day is not something we can tell you: both dates come from Judge Oliver's opinion rather than from the state-court orders themselves, and nothing on any record we can read says whether the geofencing went in.

Cities have started filing too. Baltimore sued Kalshi and Polymarket on August 13 under the same ordinance it had already aimed at six sweepstakes operators, which is the clearest sign yet that the two categories are being treated as one enforcement problem.

What happens next in Connecticut?

Nothing is final. A denied preliminary injunction is a ruling about who bears the risk while the case runs, not a judgment. The court ordered the parties to file their Rule 26(f) report by August 24, 2026 - today - and gave Connecticut until August 31, 2026 to respond to the complaint. Treat both dates as uncertain rather than fixed: on August 20 Kalshi and the Connecticut defendants jointly moved to stay the case at entry 101, asking that proceedings including "pleading in response to Kalshi's Complaint" be held until 21 days after the Second Circuit rules, and an order on that motion was entered the next day. That entry carries no number and no retrievable text, so we can say the motion has been decided and not how. If it went the way the identical motion in the Coinbase case went on the same day, neither deadline is live. Kalshi appealed its earlier New York loss to the Second Circuit, and it has not waited here either. Its notice of appeal, entry 95 on the Kalshi docket, was filed on August 10, the same day the order was entered. It runs to two pages and appeals the August 10 denial to the Second Circuit, where the case is now docketed as KalshiEX LLC v. Cafferelli, No. 26-2239. The clerk certified that notice at entry 96 the following day. On its own separate docket, Coinbase followed on August 14 with a notice of appeal at entry 94 and a motion for an emergency injunction pending appeal at entry 95, on which responses were due September 4, 2026; the clerk transmitted its record on appeal at entry 96 on August 17, Connecticut objected at entry 97 the same day, and on August 18 Judge Oliver denied that motion at entry 98, finding Coinbase "has not made a strong showing of success on the merits". Coinbase's Connecticut case has since stopped: both sides jointly moved to stay it on August 20 at entry 99, and on August 21 the judge granted the stay at entry 100, holding the matter "until 21 days after the Second Circuit's decision" and directing the clerk to administratively close the case.

Kalshi then asked Judge Oliver to let it keep trading while that appeal runs. On August 13 it moved at docket entry 97, under Rule 62(d), for "an injunction pending appeal and, in the alternative, for short-term administrative relief pending the Second Circuit's resolution of Plaintiff's forthcoming motion for an injunction pending appeal," on the argument that "this case presents complex legal questions that have divided courts across" the country. Connecticut objected the next day at entry 98, saying the motion "should be promptly denied" because there is "no basis to restrain Defendants from enforcing Connecticut law as to Kalshi's sports wagers pending a long-shot appeal to the Second Circuit," and that Kalshi "largely repeats the arguments the Court just considered and rejected." Judge Oliver agreed and denied the motion on August 15 at docket entry 99, holding that Kalshi's first three arguments were "recycled from its PI Motion" and that the CFTC's August 11 emergency order could not displace the court's own reading of the statute. We set out what the August 15 order says in full in a separate piece.

Kalshi told the court it has more than 24,000 Connecticut users and millions of dollars in open investments. The court was unmoved, and the sentence explaining why is the one operators in this whole category should read twice: Kalshi "has been on notice of the potential for state enforcement against its contracts since it began offering them. It has provided no disclosures or warnings to its users, and has instead continued to advertise itself as the 'first app for legal sports betting in all 50 states.'"

Connecticut banned sweepstakes casinos outright before any of this started, which is why our state page there carries no offers. The state-by-state matrix is the page to check before you deposit anywhere, and our guide to how these products sit under state law explains why a dual-currency model and an event contract keep running into the same statutes.

Sources & documents

• KalshiEX LLC v. Cafferelli, Memorandum & Order, D. Conn. 3:25-cv-02016, ECF 94 - 38 pages, signed August 7, 2026 by Judge Vernon D. Oliver, filed August 10, 2026. Every quotation above comes from this document
• Coinbase Financial Markets, Inc. v. Tong, Memorandum & Order, D. Conn. 3:25-cv-02121, ECF 93 - the companion denial, filed August 10, 2026
• KalshiEX LLC v. Cafferelli, Memorandum & Order, D. Conn. 3:25-cv-02016, ECF 99 - seven pages, signed August 15, 2026, denying an injunction pending appeal. This document was unretrievable when we first reported the entry's existence; it became downloadable and we read it in full on August 17
• Kalshi's notice of appeal, D. Conn. 3:25-cv-02016, ECF 95 - two pages, filed August 10, 2026. The search index still carries no text for this entry, but the PDF itself became downloadable and we read it on August 17
• Kalshi docket and Coinbase docket, read August 11 and re-read August 12, August 17 and August 19, 2026. re-read again on August 22, 2026. The clerk's certificate at Kalshi entry 96 and Coinbase's entries 94 to 97 are still not retrievable from the public mirror and are reported from the docket's own entry labels rather than their contents; the August 18 order on Coinbase's docket, which was in that category until now, is readable in full as entry 98, as are the August 20 stay motion at entry 99 and the August 21 order granting it at entry 100

Both orders were read in full from the federal court record rather than from any report of them. The state-court actions in the table are described as the Connecticut opinion describes them, in its footnotes; we have not opened the Massachusetts, Michigan, Nevada or Arizona filings, and the August 12 geofencing dates are Kalshi's commitments as recorded by the court. That date has passed and we have confirmed nothing about compliance either way. This article reports a court ruling on a preliminary motion and makes no finding about whether anyone broke the law. Neither Kalshi nor Coinbase was asked for comment before publishing.

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