Connecticut Latest To Crack Down on Sports Event Contracts

• The Connecticut Department of Consumer Protection Gaming Division today issued cease-and-desist orders to three prediction market platforms
• Cease-and-desist notices were sent to Kalshi, Robinhood, and Crypto.com
• The notices order an immediate closure of the contracts in the state

The Connecticut Department of Consumer Protection Gaming Division today issued cease-and-desist notices to Kalshi, Robinhood, and Crypto.com for their prediction market services, namely sports event contracts, reporting that all three platforms are offering sports wagers in violation of state law and without license.

The letters were sent to KalshiEX LLC, Robinhood Derivatives, LLC, and Crypto.com, ordering an immediate cessation of all advertising and offering of sports event contracts to Connecticut residents.

“Only licensed entities may offer sports wagering in the state of Connecticut,” said Department of Consumer Protection (DCP) Gaming Division Commissioner Bryan T. Cafferelli in a release. “None of these entities possess a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”

Illegal Gambling According to State Law

According to the notices, the prediction market operators allow users to “purchase contracts based on their belief that a particular sport outcome will occur, such as a specific team winning a game, division, or championship.”

All three operators are currently offering illegal sports wagers in the state, according to the DCP, running afoul of state law and engaging in sports wagering without a license.

“These contracts constitute sports wagering because they allow Connecticut residents to risk something of value for gain by an electronic wagering platform through the placement of wagers on the outcome of live sporting events or portions of a live sporting event including future events,” Director of Gaming Kristofer Gilman wrote in the letters.

According to the DCP, prediction market operators do not adhere to the state’s technical standards for sports betting, potentially leaving Connecticut customers’ financial and personal information at risk.

Additionally, the DCP notes that prediction market operators have “no integrity controls in place for these platforms,” meaning there is nothing to prevent event manipulation from participants or insiders. Regulated operators have mechanisms in place to monitor their systems and prohibit known insiders from placing wagers.

“These platforms are deceptively advertising that their services are legal, but our laws are clear,” said DCP Gaming Director Kris Gilman. “They are also operating outside of a regulatory environment, posing a serious risk to consumers who may not realize wagers placed on these illegal platforms offer no protections for their money or information. A prediction market wager is not an investment.”

What Happens Now?

Will Kalshi, Robinhood, and Crypto.com acquiesce to the cease-and-desist notices? It’s unlikely, as the prediction market operators, especially Kalshi, have taken most fights to either state or federal court when faced with cease-and-desist notices.

Kalshi filed a lawsuit against members of the New York State Gaming Commission just two days after the regulatory body sent a cease-and-desist letter to the prediction market company on Friday, Oct. 24.

Kalshi’s lawsuit against the New York State Gaming Commission revolves around the central question of who regulates sports event contracts, and prediction markets, in general.

Companies such as Robinhood, Kalshi, and Crypto.com believe that state regulatory bodies do not have the right to intrude on the government’s “exclusive” authority to regulate prediction market, filing lawsuits in New Jersey, Nevada, and Maryland to defend its practices. These companies believe the CFTC is the only regulatory body that can legally block contracts from being offered to customers.

State gaming regulators maintain the markets need to be beholden to regulations, taxes, and license fees that sports betting and gaming operators are required to follow.

The prediction market companies believe their offerings are not required to comply with state laws, as they have been preempted by the Commodity Exchange Act.