A dispute is escalating over the legality of prediction markets in Connecticut, following a cease-and-desist order from the state’s Department of Consumer Protection against Robinhood, Crypto.com, and Kalshi. The department has instructed these companies to cease offering sports event contracts, which regulators categorize as unlicensed online gambling. The firms have been directed to allow residents to withdraw any funds currently held on their platforms.
Connecticut’s Consumer Protection Commissioner, Bryan T. Cafferelli, emphasized that only licensed entities are permitted to offer sports wagering within the state. He noted that none of the mentioned companies hold the necessary license, suggesting their contracts also contravene multiple state laws and regulations.
Amidst the regulatory pushback, Kalshi is defending its business model by asserting that federal law governs its operations rather than state gaming statutes. A representative from the company stated that Kalshi functions as a regulated, nationwide exchange focused on real-world events, claiming exclusive federal jurisdiction over its activities. The company further contends that its offerings differ significantly from those provided by state-regulated sportsbooks and casinos. In light of this, Kalshi has initiated a legal challenge in federal court.
The controversy comes in the context of consumer protection concerns highlighted by Connecticut regulators. They argue that the unlicensed platforms are not required to adhere to the state’s technical standards, which include safety measures such as data protection, preventing insider betting, and monitoring for suspicious activity. According to Gaming Director Kris Gilman, these companies are misleading consumers by advertising their services as legal gambling options. He pointed out that a prediction market wager should not be considered an investment.
Connecticut officials also raised issues about the lack of established house rules governing payouts, which could restrict recourse for users in the event of disputes. Allegations have been made against the platforms for allowing betting on events influenced by a limited group of insiders, as well as for making their products accessible to underage individuals, individuals on the state’s Voluntary Self-Exclusion List, and users located on college campuses.
Currently, Connecticut allows sports betting exclusively through three licensed operators: DraftKings via Foxwoods, FanDuel through Mohegan Sun, and Fanatics, in conjunction with the Connecticut Lottery. The legal minimum age for participating in sports betting is set at 21, while the age is 18 for fantasy contests. The current framework for online gambling was established in 2021, restricting the number of statewide sports betting licenses to three entities only.
Interestingly, Kalshi recently achieved legal relief in Nevada, where a federal judge ruled that the company could not face prosecution under that state’s gambling laws while it continues its regulatory challenge. Meanwhile, Crypto.com has agreed to halt sports event market operations in Nevada following a federal court’s denial of a preliminary injunction.
