Kalshi Faces Multi-State Crackdown Over Unlicensed Sports Betting

Prediction market platform Kalshi confronts mounting regulatory pressure across multiple U.S. states. Massachusetts moves toward a preliminary injunction against the company’s sports contracts. Connecticut issued cease-and-desist orders to Kalshi and other platforms. These actions raise questions about the future of prediction markets in America.

Superior Court Justice Christopher Barry-Smith ruled Tuesday that Massachusetts will prohibit Kalshi from offering sports-related event contracts. The judge cited the company’s lack of required licensing under the Sports Wagering Law. State authorities must propose injunction terms by Wednesday.

A Massachusetts Superior Court judge in the United States said the court is preparing to issue a preliminary injunction requiring prediction market platform Kalshi to stop offering sports-related event contracts in the state of Massachusetts. The court agreed with state…

— Wu Blockchain (@WuBlockchain) January 20, 2026

Kalshi has until Friday to respond to the state’s proposal. The court will issue the halt order by week’s end. A window remains open for requested stays or delays. Kalshi did not immediately respond to requests for comment.

Massachusetts Attorney General filed a lawsuit against Kalshi in September. The complaint accused the platform’s binary contracts of violating state sports-betting laws. The judge noted that licensing requirements serve the public interest.

Connecticut Orders Kalshi, Two Other Platforms to Cease Operations

Connecticut’s Department of Consumer Protection issued cease-and-desist orders on Wednesday dec 4 2025. The orders targeted Kalshi, Robinhood, and Crypto.com for operating unlicensed sports wagering services. None of the three platforms possess required state licenses.

DCP Commissioner Bryan T. Cafferelli stated only licensed entities may offer sports wagering in Connecticut. Even with proper licensing, the platforms’ contracts would violate numerous state laws. This includes offering wagers to individuals under age 21.

✍️ LATEST: CONNECTICUT ISSUES CEASE-AND-DESIST ORDERS TO ROBINHOOD, https://t.co/UkJzV1FKCK, AND KALSHI, ALLEGING THEIR EVENT CONTRACTS CONSTITUTE UNLICENSED SPORTS BETTING. pic.twitter.com/iG0oGu5cqH

— Coinwaft (@coinwaft) December 4, 2025

DCP Gaming Director Kris Gilman said these platforms deceptively advertise their services as legal. Connecticut’s laws clearly prohibit such operations. The platforms operate outside regulatory oversight, creating serious consumer risks.

State officials emphasized that prediction market wagers differ from legitimate investments. The platforms lack Connecticut’s technical standards for wagering systems. No integrity controls exist to prevent insiders from placing wagers.

State law prohibits advertising to individuals on the Voluntary Self-Exclusion List. It also bans advertising on college campuses. The three platforms allegedly engage in both practices.

Connecticut requires all three platforms to immediately cease operations targeting state residents. They must allow Connecticut users to withdraw all held funds. Failure to comply may result in civil penalties under state law.

Wash Trading Concerns Plague Prediction Market Industry

A Columbia University study revealed significant wash trading on rival platform Polymarket. Researchers found nearly 25% of the platform’s trading volume over three years resulted from artificial transactions. Sports markets showed the highest concentration at 45% of all-time volume.

The volume of activity on Polymarket has been significantly inflated by so-called wash trading in which users rapidly buy and sell the same contracts, according to a new study by Columbia University researchers https://t.co/kWTEDPn6IS

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Election markets registered 17% wash trading volume. Politics markets showed 12%, while crypto markets had only 3%. The study clarified that Polymarket itself did not conduct the wash trading.

Columbia professor Yash Kanoria co-authored the study. He told Bloomberg that wash trading does not add liquidity or information to markets. He expressed optimism about Polymarket’s willingness to address the findings.

A Polymarket representative said the company is reviewing the study. The platform offered no immediate comment on the specific findings. Independent tracking indicates Polymarket achieves more than 95% accuracy in closing hours.

Meanwhile, both Kalshi and Polymarket achieved record trading volumes in October. Kalshi surpassed $4.39 billion in monthly trading volume. Polymarket hit an unprecedented $2.59 billion that month.

The platform subsequently restricted access to U.S. users to comply with regulatory requirements. Kalshi operates legally in many leading markets worldwide. The regulatory landscape for prediction markets remains uncertain as state-level enforcement intensifies.