Connecticut sued KalshiEX, LLC on August 26 to halt sports event contracts for state residents and seek injunctions, disgorgement, restitution and civil penalties, alleging unlicensed sports wagering outside Connecticut’s 2021 framework and arguing the contracts are gambling in substance that state law must police to protect minors and curb addiction. Kalshi, a CFTC-designated contract market since 2020, says its exchange is federally regulated, outcome-neutral and distinct from sportsbooks, and calls Connecticut’s action arbitrary enforcement that targets Kalshi while leaving other prediction markets untouched. About 20 states are in active litigation involving prediction markets, 44 state attorneys general say the CFTC lacks authority over sports prediction markets, and the CFTC has countersued states asserting exclusive federal oversight of regulated exchanges. With court rulings closely split and nearly half of U.S. states aligned against federal authority on the issue, the conflict is expected to reach the U.S. Supreme Court. Kalshi supports national safeguards, says federally regulated markets can still meet state tax obligations, and cites North Carolina’s 6% tax framework while disputing a Tax Foundation estimate of at least $2 billion in annual state revenue.