A jurisdictional dispute is escalating surrounding prediction markets after Connecticut mandated that Robinhood, Crypto.com, and Kalshi halt their offerings of sports event contracts. Meanwhile, these platforms are asserting their regulatory compliance under federal oversight.
The Connecticut Department of Consumer Protection has issued cease-and-desist notifications to the three companies, instructing them to cease unlicensed online gambling activities within the state and ensure that users can withdraw any funds currently on their platforms. This directive pertains to sports-related “prediction” products that regulators classify as wagers.
“Only duly licensed entities are permitted to offer sports wagering in Connecticut. None of the aforementioned companies hold the required license,” stated Consumer Protection Commissioner Bryan T. Cafferelli. “Even if they were licensed, their contracts would infringe upon several other state laws.”
Kalshi’s Federal Oversight Argument
Kalshi contends that its operations fall under federal law rather than state gaming regulations.
“As established by various courts, Kalshi functions as a nationwide exchange that accommodates real-world events and is exclusively subject to federal jurisdiction,” a spokesperson for the company stated. They further noted that Kalshi’s offerings are “distinct from services provided by state-regulated sportsbooks and casinos,” adding that the company has initiated litigation in federal court.
A dashboard from Dune indicates that approximately 74% of Kalshi’s bets revolve around sports-related markets.
State Officials Deny Consumer Protections
Officials in Connecticut are emphasizing consumer protection issues, asserting that unlicensed platforms are not obliged to adhere to the state’s technical standards. These standards encompass regulations regarding data security, insider betting prevention, and the monitoring of suspicious betting behaviors.
Gaming Director Kris Gilman expressed concern that the companies are “misleadingly advertising their services as legal,” further stating, “A prediction market wager is not an investment.”
Regulators also highlighted the absence of verified house rules governing payouts, a gap that may restrict consumer recourse in case of disputes. The department alleged that these platforms were advertising events influenced by a select group of insiders and made products accessible to individuals under 21, those listed on the state’s Voluntary Self-Exclusion List, and users located on college campuses.
Licensed Operators in Connecticut
Currently, Connecticut permits sports betting exclusively through three licensed operators:
• DraftKings via Foxwoods
• FanDuel via Mohegan Sun
• Fanatics via the Connecticut Lottery
The legal minimum age for sports betting is 21, while it is 18 for fantasy contests.
The state’s framework for online gambling was established through legislation in 2021 and amendments to tribal-state compacts that confined statewide sports betting licenses to just three entities.
Recently, Kalshi obtained a favorable ruling in Nevada when a federal judge determined that it could not be prosecuted under that state’s gambling laws as its challenge against regulators unfolds. In October, Crypto.com opted to halt its sports event market operations in Nevada after a federal court denied its request for a preliminary injunction.