Montana Pauses Enforcement Against Kalshi Platform

Montana pauses Kalshi enforcement as Connecticut orders nine platforms to stop

Nine companies received a cease-and-desist order from Connecticut's Department of Consumer Protection in the same week that Kalshi and Montana reached a quiet agreement to pause their fight. The two events are not unrelated.

Connecticut's order named Underdog, Polymarket, Coinbase, Crypto.com, Robinhood, Prophet X, Novig, Webull, and Gemini. The platforms must stop advertising sports-event contracts to Connecticut residents and allow existing users to withdraw funds. The DCP's argument is specific: these markets allow users under twenty-one to participate, accept bets from people on self-exclusion lists, and permit wagering on in-state college teams — all of which Connecticut gambling law prohibits by name.

Underdog filed a federal complaint the same week, asking the U.S. District Court for the District of Connecticut to block both the DCP and Attorney General William Tong from enforcing state gaming law against a federally licensed designated contract market. The legal argument is familiar — CFTC jurisdiction preempts state authority over event contracts — but the complaint runs thirty-nine pages, which tells you Underdog's lawyers believe the Connecticut case has features that require more careful construction than the standard preemption brief.

That construction is going to be tested by an inconvenient precedent. The Ninth Circuit's ruling that Kalshi's sports contracts constitute illegal betting on tribal lands gave state regulators something they did not previously have: a federal appellate court describing these instruments in the same language that state gaming statutes use. Connecticut's DCP almost certainly read that opinion before it drafted its orders. William Tong's office almost certainly read it too.

The Montana pause is worth sitting with. Under the joint stipulation, Montana agreed to hold enforcement action until the Ninth Circuit either denies rehearing or issues an en banc decision. Kalshi gets thirty days' written notice before Montana can move again. This is not a settlement in any meaningful sense — it is a clock, and the clock is tied to whatever the Ninth Circuit does next with its own ruling.

I want to be direct about where I think the consensus is wrong. The standard read on these state enforcement actions is that federal preemption eventually resolves them — that the CFTC's jurisdictional claim is strong enough to foreclose state gaming law across the board. I don't think that holds once the Ninth Circuit's framing takes root. A federal appellate court calling these contracts bets is not the same as a state attorney general calling them bets. States will now cite that language in every filing. Courts that were previously inclined to defer to the CFTC's silence will have a harder time doing so after a circuit court filled the silence with its own characterization.

I should note my own tendency here: I habitually find the scenario where regulatory friction compounds faster than platforms can absorb it. That bias is present in this read. But I think the Connecticut order — nine companies, simultaneously, with specific named violations — represents a qualitative shift rather than a continuation of the pattern. This is not one regulator testing one company. This is coordinated action with a detailed factual record, built by officials who have now watched three federal court proceedings produce three different outcomes for the platforms involved.