Connecticut judge rules Kalshi sports contracts were never swaps under CEA
A Connecticut federal judge ruled that Kalshi's sports event contracts are not swaps under the Commodity Exchange Act, depriving the CFTC of exclusive jurisdiction. Between 80% and 90% of Kalshi's listed contracts were sports-event contracts, generating a similar share of revenue. The ruling came in litigation where the CFTC had challenged Kalshi's event contracts, with the court finding Kalshi unlikely to prove its products qualify as swaps under federal law.
Kalshi's federal preemption defense now has a third hole in the map. The platform must geofence Connecticut or absorb voiding risk for trades already placed there. District courts are converging on a standard that treats CFTC registration as irrelevant to state gambling enforcement. For traders, contract validity depends on which state issued the trade, not the federal label.
Each new loss multiplies parallel litigation costs and shrinks the addressable market. The Second Circuit appeal is the only path to a uniform national rule, but that court may not rule before additional states follow Connecticut's playbook. Polymarket holds identical CFTC registration and faces identical exposure.
This ruling marks the third state loss for Kalshi's federal preemption defense in under a week, following Utah's rejection on nearly identical grounds and Wisconsin's earlier defeat, while Minnesota remains the lone federal shield in a rapidly splintering map.