Key Insights
- Connecticut orders Kalshi, Robinhood, and Crypto.com to end the sale of unlicensed sports betting and prediction markets.
- The state warns that the platforms expose users to financial and data risks and require immediate withdrawals.
- Kalshi, Robinhood, Crypto.com come under increasing legal pressure as states continue to crack down on sports-related prediction markets.
Connecticut has ordered Kalshi, Robinhood, and Crypto.com to cease operations, as the state considers their activities to be illegal online gambling. Regulators claim that sports-event contracts provided under prediction markets are unlicensed sports-wagers. The action is part of a larger effort at the national level to limit the use of unregulated products in trade based on events.
The Department of Consumer Protection’s Gaming Division sent cease and desist notices to the three companies. Officials stated that the platforms lack the necessary licenses to offer sports wagering in Connecticut. They also noted violations concerning age limits and state gaming policies.
Regulators have warned that users on unlicensed services face financial and data security risks. “Only licensed entities may offer sports wagering in the State of Connecticut,” said DCP Commissioner Bryan T. Cafferelli.
The state ordered all three platforms to stop offering or promoting sports-event contracts to Connecticut residents and to allow immediate withdrawals. The notice stated that non-compliance may result in civil or criminal penalties.
Legal Disputes Shape Future of Sports Prediction Markets
The enforcement action adds pressure to a sector already operating in a complicated regulatory space. Kalshi, which recently raised $11 billion in a fundraising round, is already defending itself against a class-action lawsuit for allegedly operating unlawful sports betting operations. In response to Connecticut’s order, the company has filed a lawsuit against the state in district court, contending that it is a federally regulated derivatives exchange under the supervision of the CFTC. The firm is now seeking an injunction that would prevent the state from enforcing its directive.
Robinhood and Crypto.com are also facing legal challenges as they expand their sports-oriented wagering products. Robinhood has leaned into event-based contracts with the acquisition of LedgerX, positioning itself to expand its derivatives footprint despite regulatory friction. Meanwhile, Crypto.com has already suspended its sports prediction market activities in Nevada after a dispute with Nevada’s Gaming Control Board.
Several states have been ratcheting up the heat on prediction markets, which is a warning sign of things to come. Connecticut’s move adds strength to that trend and reinforces the limits put on unlicensed sports wagering.
