The state Department of Consumer Protection’s Gaming Division has taken significant action against three well-known financial technology firms, ordering them to cease operations associated with what officials have categorized as unlicensed gambling activities. Cease-and-desist letters were dispatched to KalshiEX LLC, Robinhood Derivatives LLC, and Crypto.com, each accused of offering illegal online sports wagers in Connecticut.
Despite marketing their services as legitimate, the companies are alleged to be promoting “sports event contracts,” which regulatory authorities insist qualify as sports bets and fall under the purview of state licensing requirements. According to DCP Commissioner Bryan T. Cafferelli, “Only licensed entities may offer sports wagering in the state of Connecticut.” He emphasized that none of the accused companies hold the necessary licenses, and even if they did, their operations would still entail violations of other state laws, particularly concerning age restrictions.
Kris Gilman, the gaming director for the DCP, expressed concerns over the misleading nature of these companies’ claims regarding the legality of their services. He cautioned that their operations exist outside a regulated framework designed to protect consumers. “A prediction market wager is not an investment,” he stated, highlighting the potential risks involved for users, including the lack of safeguards for their funds and personal information.
This development in Connecticut reflects a broader national discourse concerning platforms that blur the distinctions between gambling and trading. Regulatory bodies in various states and at the federal level are increasingly scrutinizing prediction markets and event-based contracts, which have raised numerous questions about how such financial products should be governed. Issues under consideration include the applicability of consumer protections and the enforcement of age restrictions.
State officials have noted that the firms in question fail to comply with essential technical standards necessary for wagering systems. They reportedly lack controls to prevent insider betting and do not possess house rules that are subject to regulatory review. Furthermore, it is alleged that these companies have targeted individuals on the state’s self-exclusion list, promoted their services on college campuses, and offered bets to those under 21—all of which contravene Connecticut law.
In light of these violations, the involved firms must immediately halt advertising and the offering of sports event contracts to residents of Connecticut. They are also required to facilitate the withdrawal of any funds held on behalf of state users. If the firms fail to comply, they could face civil penalties under the Connecticut Unfair Trade Practices Act or even criminal charges.
Currently, Connecticut has licensed three operators permitted to provide online sports wagering: DraftKings in partnership with Foxwoods, FanDuel in partnership with Mohegan Sun, and Fanatics via the Connecticut Lottery Corporation. To participate in online or in-person sports wagering, individuals must be at least 21 years of age.
