Is Coinbase legal in Connecticut?

Coinbase Financial Markets, Inc. is a CFTC-registered futures commission merchant. Its complaint, filed December 18, 2025 as No. 3:25-cv-02121, says it agreed with Kalshi to let Coinbase customers "use Coinbase's platform as an access point to trade event contracts listed on Kalshi's exchange" (¶5), and that it would begin offering them nationwide, Connecticut included, in January 2026 (¶3). It named Attorney General William Tong, Consumer Protection Commissioner Bryan T. Cafferelli and Director of Gaming Kristofer Gilman, and asked the court to declare Connecticut's gambling laws "squarely preempted as applied to sports event contracts traded on federally regulated exchanges" (¶1).

Connecticut had not acted against Coinbase when it filed. The judge later wrote that "Coinbase does not allege that Defendants directed any separate enforcement action or other conduct specifically toward Coinbase"; its claims grew out of the department's cease-and-desist to Kalshi, and it also pointed to a similar letter sent to Robinhood (ECF 93, p.3 and n.4).

He heard argument on February 11, 2026. A group of tribal gaming associations and 16 tribes, among them the Mashantucket Pequot Tribal Nation and the Mohegan Tribe of Indians of Connecticut, filed an amicus brief in the case (ECF 93, p.3 n.9).

On August 10 he denied the preliminary injunction in a five-page order that adopts his companion opinion in Kalshi's case, attached as an exhibit. Apart from Coinbase being an intermediary rather than an exchange, he found the case raised "the same operative facts and legal questions" (p.3). Coinbase had not shown it was likely to establish either that Kalshi's sports-event contracts, "offered through Coinbase", are swaps under the Commodity Exchange Act or that federal law preempts Connecticut's gambling laws for them (p.4). He said he weighed arguments Kalshi had not made, such as Coinbase's claimed loss of customer goodwill, and that none changed the result (p.4 n.11). On irreparable harm, the equities and the public interest he also found for the state (p.5).

The court then denied Coinbase's emergency motion for an injunction pending appeal on August 18 (docket, ECF 98). On August 21 it granted the parties' joint motion to stay the district case while the appeal is pending (ECF 100), which put off the August 24 and August 31 deadlines the August 10 order had set.

Coinbase appealed on August 14 (No. 26-2297). In a September 3 order, Circuit Judge William J. Nardini granted Coinbase's request that one panel decide its injunction motion together with Kalshi's two, denied its request to expedite, and denied consolidation with Kalshi's Connecticut appeal, directing instead that the appeals "be heard in tandem" with Nos. 26-1835 and 26-2239. Coinbase filed its opening brief on October 7 (docket), the CFTC filed an amicus brief on October 14, and the state's brief is due November 20. On October 21 the court placed Coinbase's motion for an injunction pending appeal on its argument calendar for November 3, 2026. We found no ruling on the injunction motion or the appeal.

Kalshi's side of the same dispute, including the order Connecticut sent it in December 2025, is on is Kalshi legal in Connecticut?.

On September 10, 2026 the governor's office announced that the Department of Consumer Protection had issued cease-and-desist orders that week to nine prediction markets: Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, Gemini and Underdog Predict. According to the release, all nine must "immediately cease and desist advertising, offering, promoting, or otherwise making available 'sports event contracts' or any other form of unlicensed online gambling to Connecticut residents," and failing to comply can bring civil penalties under the Connecticut Unfair Trade Practices Act or criminal penalties under the gaming statutes. The department also subpoenaed nearly 30 businesses, which it says are not under investigation.

We have not seen the order addressed to Coinbase; the release says copies are available on request through the department's GovQA portal. An agency order is not a court order, and no court has enforced or set this one aside in any filing we found.

No court order or filing we found limits withdrawals, deposits or open positions. The governor's release lists nine platforms, then says "DCP also ordered all three platforms to allow Connecticut residents to withdraw any funds currently held by the platforms." It does not say which three, or whether Coinbase is one. The order sent to Coinbase is not public (the release offers copies on request through the department's GovQA portal), so we cannot confirm whether it includes that term. We could not determine whether Coinbase still offers sports contracts in Connecticut.

Coinbase's argument is that these contracts are swaps on a CFTC-designated exchange and outside state gambling law; Connecticut's is that sports event contracts are wagering it must license; Judge Oliver found Coinbase unlikely to win at this early stage. Whichever way the Second Circuit goes, the answer is about who may regulate Coinbase's sports business. No filing in the case discusses federal income tax, and the IRS has not issued guidance on event contracts.

The people we've seen file their event contracts mostly take one of three routes: the gambling treatment, winnings and losses reported separately, capital gains and losses trade by trade, or Section 1256 with its 60/40 long-term and short-term split. The Tax Center explains the forms behind each, and Coinbase's status by state covers the rest of the country.