Connecticut Orders Robinhood, Crypto.com, & Kalshi To Stop Prediction Markets

Connecticut’s Department of Consumer Protection issued cease-and-desist orders to Kalshi, Robinhood and Crypto.com, alleging that the platforms are conducting unlicensed online gambling there.

“Only licensed entities may offer sports wagering in the state of Connecticut,” DCP commissioner Bryan T. Cafferelli said in a statement on Wednesday.

“None of these entities possess a license to offer wagering in our state, and even if they did, their contacts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”

DCP Gaming Director Kris Gilman accused the platforms of “deceptively advertising that their services are legal,” adding that they operate outside of the state’s regulatory environment, “posing a serious risk to consumers who may not realize that wagers placed on these illegal platforms offer no protections for their money or information.”

As CoinTelegraph’s Martin Young details below, prediction markets have come under legal scrutiny in several US states, as the use of these platforms has skyrocketed this year and attracted billions of dollars in investment for allowing users to bet on the outcome of a variety of events.

Prediction markets saw huge volumes in November. Source: Token Terminal 

Kalshi fires back in court

A Kalshi spokesperson told Cointelegraph that it is “a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction.

“It’s very different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments and have filed suit in federal court,” Kalshi added.

In a complaint filed on Wednesday against the DCP, Kalshi claimed that “Connecticut’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges.”

[ZH: Kalshi is perhaps the most exposed in this suit given their massive push into sports predictions…]

It added that its platform was subject to the Commodity Futures Trading Commission’s “exclusive jurisdiction” and its sports event contracts “are lawful under federal law.”

“As we’ve previously shared, Robinhood’s event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity, allowing retail customers to access prediction markets in a safe, compliant, and regulated manner,” a Robinhood spokesperson told Cointelegraph.

Crypto.com did not immediately respond to requests for comment.

In its statement, Connecticut’s DCP said that prediction market platforms pose serious risks to consumers because they lack the required technical standards and security protections for financial and personal data.

Source: Connecticut Department of Consumer Protection

The agency claimed that such platforms also lack integrity controls to prevent insider betting or manipulation, operate without regulatory oversight of their payout rules, advertise to self-excluded gamblers and on college campuses, and permit betting on events with known outcomes, thereby giving insiders unfair advantages.

Only three platforms are legally licensed for sports wagering in Connecticut: DraftKings, FanDuel and Fanatics, all of which require users to be at least 21 years old.

Kalshi under fire in at least 10 US states

Connecticut is not the only state to take a hard stance on prediction platforms; regulators in two neighboring states have previously taken action. 

New York sent a cease and desist to Kalshi in late October, and the company responded on Oct. 27 by suing the state. Meanwhile, the Massachusetts state attorney general sued Kalshi in the state court in September. 

Kalshi also previously received cease and desist orders from Arizona, Illinois, Montana and Ohio this year, and it remains embroiled in ongoing litigation in New Jersey, Maryland and Nevada, reported Bookies.

Kalshi announced this week that it has closed a $1 billion funding round at a valuation of $11 billion, after seeing its best-ever monthly volume in November.