The ruling prevents Connecticut regulators from taking action against Kalshi while the case proceeds. This now adds to Kalshi’s mounting legal battles across multiple states, including New York, Massachusetts, New Jersey, Nevada, Maryland and Ohio. Meanwhile, Terraform Labs co-founder Do Kwon faces a complex sentencing process in the US as Judge Paul Engelmayer examines how his criminal exposure in South Korea and prior custody in Montenegro should influence the outcome. Kwon pleaded guilty to wire fraud charges tied to the collapse of Terra, and could ultimately face decades in South Korea even after serving time in the US.
Kalshi Scores Legal Reprieve
A US federal judge gave prediction markets platform Kalshi a temporary lifeline after the state of Connecticut tried to shut down its operations. This is one of the latest developments in the escalating national battle over whether federally regulated event-contract platforms fall under state gambling laws.
The dispute began on Dec. 2, when the Connecticut Department of Consumer Protection issued cease and desist orders to Kalshi, as well as to Robinhood and Crypto.com, accusing them of running unlicensed online gambling operations by offering what the state deemed to be sports wagering through event-based prediction contracts. Kalshi pushed back immediately by filing a lawsuit the next day that argued its markets are fully compliant with federal law and fall squarely under the Commodity Futures Trading Commission’s exclusive jurisdiction. This means that states have no authority to regulate or ban its activities.
On Monday, federal judge Vernon Oliver sided with Kalshi in the short term, and ordered Connecticut regulators not to take any enforcement action while the court considers the company’s request for a broader temporary halt. Under the timeline laid out in the order, the DCP must submit a response by Jan. 9, Kalshi must provide additional support by Jan. 30 and oral arguments are expected in mid-February.
The case could become a major test of where the line is drawn between federal commodities oversight and state gambling laws. This issue has become very pressing as prediction markets gained a lot of traction in US finance and politics.
Kalshi’s clash with Connecticut now adds to the growing list of state-level battles. The platform, which is a CFTC-designated contract market, quickly became one of the industry’s largest players, and even recorded $4.54 billion in trading volume in November. But that impressive rise brought heightened scrutiny from regulators across the country.
New York issued its own cease and desist order in October, which also caused Kalshi to sue. Additionally, Massachusetts’ attorney general filed suit in September, while regulators in New Jersey, Nevada, Maryland and Ohio have all faced legal challenges from Kalshi after trying to impose state gambling rules on the platform.
Do Kwon’s Legal Fate Up in the Air
In other crypto-related legal news, Terraform Labs co-founder Do Kwon is set to be sentenced on Thursday in the United States after pleading guilty to two felony counts, but a federal judge is already probing how his legal troubles in South Korea and Montenegro could shape the outcome.
In a Monday filing, Judge Paul Engelmayer asked both prosecutors and defense attorneys to detail the charges Kwon faces in South Korea and the potential maximum and minimum sentences he could receive there. Kwon is expected to be extradited to his home country after serving any US prison time, and could face up to 40 years under South Korean law, according to his defense team.
Do Kwon
Engelmayer also questioned whether the time Kwon spent in custody in Montenegro—where he served a four-month sentence for using falsified travel documents and fought extradition to the United States for over a year—would count toward any US sentence. Prosecutors and defense lawyers were asked to clarify whether all parties agree that the Montenegro custody time should not be credited. The judge’s inquiries suggest that there are concerns that if the US were to send Kwon to South Korea to serve the latter portion of his sentence, authorities there could release him earlier than expected.
Kwon pleaded guilty in August to wire fraud and conspiracy to defraud for his role in the 2022 collapse of the Terra ecosystem, which is widely considered one of the most damaging in crypto history. The implosion triggered a cascade of bankruptcies and billions in investor losses, and US prosecutors argued the harm caused by Kwon exceeded that of Sam Bankman-Fried, Alex Mashinsky and OneCoin’s Karl Sebastian Greenwood combined. Prosecutors are seeking at least 12 years in prison, while Kwon’s attorneys have requested no more than five.
Even if Kwon were sentenced to time served in the United States, his lawyers said he would immediately be moved into pretrial detention in South Korea to face long-standing criminal charges there.
