Connecticut has taken a comprehensive action targeting prediction markets, issuing "immediate cease and desist" orders to Kalshi, Robinhood, and Crypto.com for operating unlicensed online gambling. State regulators stated that the products these platforms offer under the guise of "sports event contracts" should be considered legal sports betting, and that none of them currently have the authority to offer such services. This decision has reignited regulatory debates in prediction markets and raised significant questions about the future of the industry.
Cease and Desist Order was issues to crypto platforms
Regulators in Connecticut have intensified their pressure on prediction markets by issuing "immediate cease and desist" orders to Kalshi, Robinhood, and Crypto.com. The state's Department of Consumer Protection stated that these three platforms offer unlicensed online gambling, arguing that products marketed as "sports event contracts," in particular, amount to illegal sports betting. The order, issued by the Gaming Division, requires the platforms to immediately cease advertising, promoting, and offering contracts to Connecticut residents. It must also ensure that users can withdraw funds from their accounts. DCP Commissioner Bryan T. Cafferelli stated, “Only licensed businesses are authorized to offer sports betting in Connecticut,” adding that the platforms are not only operating without a license but also violating numerous state regulations. The statement highlighted issues such as offering bets to those under 21, a lack of technical standards for consumer data protection, and a lack of security measures to protect against the risk of insider trading. Regulators also highlighted the fact that some platforms target college campuses, which is a clear violation.
Officials also criticized the platforms for marketing their services as “investment” products. DCP Gaming Director Kris Gilman said, “These contracts are not investments; they are illegal betting activity. Consumers should understand that there are no legal safeguards protecting their money or personal information.” Gilman also emphasized that transactions made on illegal platforms are the sole responsibility of the user, and there is no legal protection for recovering any losses.
The consequences of non-compliance with regulations can be severe. Companies violating the orders could face civil penalties under the Connecticut Unfair Trade Practices Act or criminal penalties under state gambling laws. There has been no immediate comment from Kalshi, Robinhood, or Crypto.com.
Prediction markets have become a rapidly growing new industry, particularly in the US, where finance and information intersect. While the CFTC's federal approvals for Kalshi and Polymarket mean that this area is not completely off-limits, state-by-state regulations remain highly uncertain. Connecticut's decision is seen as a strong signal that states will continue to classify prediction markets as sports betting within their own legal frameworks.
Kalshi's encounter with similar interventions in Arizona, Montana, Illinois, and Ohio this year demonstrates that the company's operations are facing a regulatory challenge across the US. This latest move has placed Connecticut more prominently among states that have tightened the scrutiny of prediction markets.
