Montana's pause gives Kalshi a template other states may follow

The five-page joint stipulation that Montana signed with Kalshi on September 9 is not a settlement and not a surrender. It is a holding pattern — and holding patterns have a way of becoming permanent.

Under the agreement, Montana agreed to freeze all enforcement against Kalshi until the Ninth Circuit resolves the company's rehearing petition. No cease-and-desist proceedings, no administrative action, no investigation. If Montana wants to move, it has to give Kalshi thirty days' written notice after the court speaks. That is not a state pressing its advantage. That is a state buying time while it waits to see which way the legal wind blows.

I have watched regulatory standoffs resolve this way before. A state files, the company pushes back hard in federal court, the state quietly agrees not to enforce while the litigation runs. The enforcement pause gets extended once, then again. By the time the underlying question is settled, the platform has years of operating history in the state and the political will to act has evaporated. The pause is the outcome.

Connecticut is doing the opposite. Nine cease-and-desist orders in a single sweep — Underdog, Robinhood, Polymarket, Coinbase, Crypto.com and four others — and a public position from Attorney General William Tong that state gaming law applies regardless of what the CFTC thinks. Underdog responded with a 39-page federal complaint asking for a declaratory judgment that Connecticut cannot apply its gaming regulations to federally designated contract markets, plus a permanent injunction. The legal theory is the same one Robinhood filed and the same one Kalshi has been running: CFTC jurisdiction is exclusive, and states are operating outside their lane.

The reporting says the Connecticut and Montana situations are two separate stories. I don't think that's where this lands. They are the same story told from opposite ends of the same bet. Montana watched the Ninth Circuit rule that Kalshi's sports contracts constitute illegal gambling on tribal lands and concluded the litigation risk of pressing forward outweighs whatever the state gains from enforcement. Connecticut watched the same ruling and concluded the Ninth Circuit's logic — that these are bets, not derivatives — validates exactly what the state has been arguing all along.

Both readings of the Ninth Circuit decision are defensible. That is the actual problem. The court's language was precise enough to hand both sides a usable precedent, and until either the full Ninth Circuit takes the case en banc or a different circuit rules differently, every state attorney general gets to choose which reading they prefer. States that want to enforce will cite McKeown's framing of the contracts as bets. States that want to wait will cite federal preemption and the CFTC's silence as cover for inaction.

Underdog's complaint makes one argument that the others have not pressed as directly: that the decision whether to prohibit event contracts on gaming grounds belongs exclusively to the CFTC, not to state regulators. If a federal court in Connecticut accepts that framing, it does not just protect Underdog — it hands every platform operating as a designated contract market a template for neutralizing state enforcement nationwide.