State Accuses Platforms of Offering Unlicensed Sports Wagering Through Event Contracts
The US state of Connecticut has issued cease and desist orders to Robinhood, Kalshi, and Crypto.com, accusing the platforms of offering unlicensed sports betting through event contracts. The Connecticut Department of Consumer Protection (DCP) sent letters to the three platforms on Wednesday, claiming they were “conducting unlicensed online gambling, more specifically sports wagering,” with event contracts available online.
“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,” stated DCP Commissioner Bryan Cafferelli. 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.”
Prediction markets have faced increased legal scrutiny across several US states as their usage has significantly grown this year, attracting substantial investment by enabling users to bet on the outcomes of various events.
Kalshi Responds with Federal Lawsuit
A spokesperson for Kalshi stated that the company is “a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction.” The spokesperson added, “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.”
In a complaint filed on Wednesday against the DCP, Kalshi contended that “Connecticut’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges.” The company further asserted that its platform falls under the Commodity Futures Trading Commission’s “exclusive jurisdiction” and that its sports event contracts are lawful under federal law.
Crypto.com and Robinhood did not immediately provide comments when requested.
The Connecticut DCP highlighted in its statement that prediction market platforms pose significant risks to consumers due to a lack of required technical standards and security protections for financial and personal data. The agency also claimed that such platforms 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 granting insiders unfair advantages.
In Connecticut, only three platforms are legally licensed for sports wagering: DraftKings, FanDuel, and Fanatics. All of these licensed platforms require users to be at least 21 years old.
Kalshi Faces Regulatory Actions in Multiple States
Connecticut is not the only state to adopt a firm stance against prediction platforms; regulators in two neighboring states have also taken action previously. New York issued a cease and desist order to Kalshi in late October, to which the company responded by filing a lawsuit against the state on October 27. Concurrently, the Massachusetts state attorney general sued Kalshi in state court in September.
Kalshi had previously received cease and desist orders from Arizona, Illinois, Montana, and Ohio this year. The company is also currently involved in ongoing litigation in New Jersey, Maryland, and Nevada, according to reports.
Kalshi announced this week that it has successfully closed a $1 billion funding round, valuing the company at $11 billion. This funding announcement follows the platform’s record-breaking monthly volume in November.