Connecticut Fires Warning Shot at Sports Prediction Markets with Cease-and-Desist Orders
The state of Connecticut has taken a significant step in regulating sports prediction markets by issuing cease-and-desist orders to three major players in the industry: Robinhood, Kalshi, and Crypto.com. The orders, sent on Wednesday, accuse these companies of conducting unlicensed online gambling, specifically sports wagering, in the state.
The state’s Department of Consumer Protection has ordered the companies to immediately stop advertising, offering, or promoting their contracts or any other form of unlicensed online gambling to Connecticut residents. The Department claims that none of these entities possess a license to offer wagering in the state and that their contracts violate numerous state laws and policies, including offering wagers to individuals under the age of 21.
Companies Respond to Cease-and-Desist Orders
Robinhood has argued that it is regulated by the federal government and that its event contracts are offered through a CFTC-registered entity, allowing retail customers to access prediction markets in a safe and compliant manner. Crypto.com has not responded to requests for comment, while Kalshi has stated that it is a regulated, nationwide exchange for real-world events and is subject to exclusive federal jurisdiction.
Kalshi has also filed a lawsuit in federal court, arguing that it is confident in its legal arguments and that its operations are different from those of state-regulated sportsbooks and casinos. The company has also pointed out that it is regulated by the federal Commodity Futures Trading Commission as a designated contract market (DCM).
Broader Implications for the Industry
The dispute between Connecticut and these sports prediction markets is not an isolated incident. The state of New York is also in a legal dispute with Kalshi over the same issue, and the company is suing the state over its position. A federal judge in Nevada has also ruled that state regulators have jurisdiction over some sports-based events contracts, potentially threatening the industry’s argument on this point.
Meanwhile, Polymarket, the biggest crypto-native prediction market provider, has rolled out an app to more than 20 U.S. states as it prepares for a broader official relaunch in the U.S. The company’s move highlights the growing interest in sports prediction markets and the need for clear regulations to ensure a safe and compliant environment for consumers.
The outcome of these disputes will have significant implications for the sports prediction market industry, and it remains to be seen how the companies will respond to the cease-and-desist orders and the ongoing legal challenges. One thing is certain, however: the industry will be watching closely as these developments unfold.
