Montana Pauses Kalshi Enforcement, Federal Suit Dropped

All eight Montana defendants signed a joint stipulation on September 17, 2026 promising not to investigate, charge or issue cease-and-desist orders against Kalshi over event contracts until the Ninth Circuit finishes with Kalshi's rehearing petition, and Kalshi dropped its federal suit in exchange. The eight are the attorney general, a division official, the Gambling Control Division itself and five gambling commission members. Nothing in the document touches sweepstakes casinos, which remain banned in Montana.

The case is KalshiEX LLC v. Knudsen, No. 6:26-cv-00028 in the District of Montana, Helena Division, before District Judge Donald W. Molloy. We downloaded the stipulation itself, a five-page filing entered as docket entry 35, and every quotation below is from that document rather than from a summary of it. That is how we check everything we publish.

What did Montana actually agree not to do?

The operative promise is paragraph 1, and it is broader than a simple pause on the existing cease-and-desist orders. Defendants agreed they "will not commence, pursue, or refer for prosecution any civil or criminal enforcement action, investigation, cease-and-desist proceeding, or other administrative action against Kalshi, its affiliates, or their respective officers, directors, employees, agents, or members" for alleged violations of nine sections of the Montana Code, plus an administrative rule, "or any other Montana law or regulation".

The scope limit is what the promise attaches to: it covers "Kalshi's role in transactions involving event contracts traded on a designated contract market". That is the whole of it. It is not a general truce about gambling in Montana.

The clock runs "until the later of (i) Kalshi's request for further review being denied, or (ii) the issuance of an en banc decision". Paragraph 2 adds that if Montana wants to move after that point, it "will provide Kalshi with 30 days' written notice before initiating such Enforcement Action".

Why did Kalshi let five defendants go permanently?

Because, on the parties' reading, those five could not have done anything to it anyway. The stipulation explains that "[u]nder Montana law, the Montana Attorney General has the authority to initiate or pursue any enforcement action against Kalshi in their own right", while the Commission Defendants "only have the statutory authority to report alleged violations of law to the attorney general, the legislative auditor, or other law enforcement authority for further investigation or action", citing Montana Code Annotated section 23-7-212(3)(c).

It then says the plain part out loud: "Kalshi's agreement to dismiss the Commission Defendants with prejudice is made in reliance on these statutory authorities, and a representation from counsel for Defendants that the Commission Defendants have no independent enforcement authority." The attorney general, the division and Sterhan were dismissed without prejudice, which leaves them able to be sued again.

The stipulation also names its own trigger. The agreement was "reached in connection with Kalshi's pending Petition for Rehearing and Rehearing En Banc, filed September 9, 2026", seeking rehearing of the panel opinion in KalshiEX, LLC v. Assad, No. 25-7516 (9th Cir. Aug. 28, 2026). So both sides are waiting on the same appellate question, and both agreed to stop spending money in Montana until it is answered.

Was Montana winning or losing when it settled?

The docket does not read like a state in retreat. Three weeks earlier, on August 27, Judge Molloy denied the parties' stipulated motion to extend an existing stay, lifted the stay, and ordered that "the State must answer or otherwise respond to Kalshi's complaint within 21 days of this Order", adding that "[n]o extensions of time will be granted". The same order denied Kalshi's motion for a preliminary injunction without prejudice, which means Kalshi never held an injunction against Montana. A preliminary pretrial conference had been set for October 22, 2026 in Missoula, with a joint discovery plan due October 15.

The sequence, from the docket:

• June 1, 2026 - clerk's notice reassigns the case to Judge Molloy after an objection to magistrate-judge jurisdiction
• August 27, 2026 - Molloy lifts the stay, orders the state to respond within 21 days with "[n]o extensions of time", and denies Kalshi's preliminary-injunction motion without prejudice
• September 9, 2026 - Kalshi files its Petition for Rehearing and Rehearing En Banc in the Ninth Circuit
• September 17, 2026 - all eight defendants and Kalshi sign the joint stipulation; the suit is dismissed
• October 15 and 22, 2026 - the joint discovery plan and the preliminary pretrial conference in Missoula that the schedule had been heading for

Read against that, the September 17 filing is what both sides did instead of litigating on Molloy's timetable. The stipulation records that "[n]o Defendant has served an answer or a motion for summary judgment in this action", which is why a Rule 41(a)(1)(A)(ii) dismissal was available at all.

What does this change for a Montana player?

On sweepstakes casinos, nothing, and the contrast is the point. The nine statute sections listed in the stipulation are tied to Kalshi and to designated-contract-market event contracts, and no sweepstakes operator is a party to it or a beneficiary of it. Montana was the first state to ban the sweeps model by statute: SB 555 took effect on October 1, 2025 and carries felony penalties of up to 10 years and $50,000, as set out on our Montana state page. So the same Gambling Control Division that has just agreed, in writing, to stop investigating one online operator for a year or more is the division a sweeps operator faces with no such agreement available to it. The difference is not that Kalshi's product is legal in Montana. No court has said that. The difference is that Kalshi sued, and had a federal appeal worth pausing for.

That is a useful thing to know about how these fights actually end. Kalshi bought a pause by being mid-appeal in another circuit, not by winning in Montana, where the only substantive ruling on its file went against it. A sweeps operator with no live appeal and a felony statute pointed at it has nothing to trade, and what that leaves a player is whatever cash-out window the operator chooses: VGW's exits from other banned states ran 14 to 57 days. The currency distinction the Montana statute turns on is in our guide to Gold Coins and Sweeps Coins, and the doctrine the whole model rests on is in our guide to whether sweepstakes casinos are legal.

State enforcement against the prediction-market model is moving in two directions in the same week. On September 16 Missouri's attorney general began sending Kalshi and five rivals cease-and-desist letters with a thirty-day deadline, and sent the second pair on September 17, the day this stipulation was signed. Missouri's letter to Kalshi cites the same Ninth Circuit Assad decision that Montana has now agreed to wait on, and we read that opinion in full when it landed. Elsewhere, the Ninth Circuit held in a separate case that Kalshi's sports contracts are class III gaming on tribal land, and Connecticut is being sued by Underdog over its own order, one of the nine prediction markets Connecticut ordered out on September 10.

For anyone weighing where to put money, a state standing down is not a state approving, and an operator winning a procedural round is not an operator that has been found lawful. If you want brands we have actually tested and scored rather than ones currently negotiating with attorneys general, start at our ranked list of sweepstakes casinos.

Sources & documents

• Joint Stipulation of Dismissal, ECF 35, filed September 17, 2026 - 5 pages; the source of every quoted term, the two defendant groups, the statute list, the 30-day notice clause and the signature block
• CourtListener docket, KalshiEX LLC v. Knudsen, No. 6:26-cv-00028 (D. Mont.) - read September 19, 2026; the source of the judge and of the June 1, 2026 clerk's notice reassigning the case to Judge Molloy after an objection to magistrate-judge jurisdiction
• CourtListener entry query for this docket - 56 document rows, the source of the verbatim August 27, 2026 order text lifting the stay and denying the preliminary injunction, and of the October 22 pretrial conference setting
• Missouri cease-and-desist letter to KalshiEX LLC - cited here only for its reliance on the same Assad decision

This piece reports the terms of a filed stipulation and orders on a public federal docket. No court has ruled on whether Kalshi's event contracts are lawful under Montana law, and nothing here is a finding against anyone.

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