Connecticut has issued cease and desist orders to Robinhood, Kalshi, and Crypto.com, accusing these platforms of offering unlicensed sports betting through event contracts.
The Connecticut Department of Consumer Protection (DCP) sent letters to the three platforms on Wednesday, stating that they are "engaging in unlicensed online gambling, particularly sports betting," and providing event contracts online.
DCP Commissioner Bryan Cafferelli stated, "These entities do not have the necessary licenses to offer betting in this state, and even if they did, their contracts violate numerous other laws and policies in this state, including offering betting to individuals under 21."
DCP Gaming Director Kris Gilman accused these platforms of "deceptively claiming their services are legal," adding that they operate outside the regulatory environment of the state, "posing serious risks to consumers, as they may not realize that bets placed on these illegal platforms provide no protection for their funds or information."
As the usage of these platforms has surged this year, attracting billions in investments by allowing users to bet on the outcomes of various events, prediction markets are under legal scrutiny in multiple states across the U.S.
A Kalshi spokesperson told Cointelegraph that Kalshi is a "regulated, nationwide real-world event exchange, subject to exclusive federal jurisdiction."
"This is fundamentally different from the services offered by state-regulated sports betting companies and casinos to their customers. We are confident in our legal position and have filed a lawsuit in federal court," Kalshi added.
In a lawsuit filed against the DCP on Wednesday, Kalshi claimed, "Connecticut is attempting to regulate Kalshi, intruding into the federal regulatory framework established by Congress for the regulation of derivatives on designated exchanges."
It added that its platform is under the "exclusive jurisdiction" of the U.S. Commodity Futures Trading Commission (CFTC), and its sports event contracts are "legal under federal law."
A Robinhood spokesperson told Cointelegraph, "As we have shared previously, Robinhood's event contracts are federally regulated by the CFTC and are offered through Robinhood Derivatives, LLC, a CFTC-registered entity, allowing retail customers to access prediction markets in a safe, compliant, and regulated manner."
Crypto.com did not immediately respond to a request for comment.
In its statement, Connecticut's DCP stated that prediction market platforms pose serious risks to consumers because they lack the technical standards and security protections necessary for financial and personal data.
The agency noted that such platforms also lack integrity controls to prevent insider betting or manipulation, their payout rules are not subject to regulatory oversight, they advertise to self-excluded gamblers and college campuses, and they allow betting on events with known outcomes, giving insiders an unfair advantage.
Currently, only three platforms are legally licensed for sports betting in Connecticut: DraftKings, FanDuel, and Fanatics, all of which require users to be at least 21 years old.
Connecticut is not the only state taking a hard stance against prediction platforms; regulators in two neighboring states have also taken action.
New York issued a cease and desist order to Kalshi in late October, and the company sued the state on October 27. Meanwhile, the Massachusetts Attorney General sued Kalshi in state court in September.
According to Bookies, Kalshi has also received cease and desist orders from Arizona, Illinois, Montana, and Ohio this year, and is still embroiled in ongoing litigation in New Jersey, Maryland, and Nevada.
Kalshi announced this week that it has completed $1 billion in funding, valuing the company at $11 billion, following its best-ever monthly trading volume in November.
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Original article: “Connecticut Orders Robinhood, Crypto.com, Kalshi to Cease Prediction Market Operations”
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