Connecticut has just drawn heavy artillery against three digital finance giants. Kalshi, Robinhood and Crypto.com find themselves in the sights of the authorities for offering unlicensed sports betting. An offensive that could reshape the contours of the emerging online prediction market.
In brief
- Connecticut accuses Kalshi, Robinhood and Crypto.com of operating illegal sports betting without a state license.
- All three companies were issued orders to immediately cease all sports betting activities aimed at Connecticut residents.
- The platforms invoke their federal regulation by the CFTC to challenge state jurisdiction.
- This offensive is part of a broader movement: New York, Massachusetts and several other states are also pursuing Kalshi.
Predictive markets threatened by a wave of state regulation
The Connecticut Department of Consumer Protection doesn't beat around the bush. On Wednesday, the agency sent cease and desist orders to three major prediction market platforms: Robinhood, Kalshi and Crypto.com.
The accusation is clear. These companies would carry out unauthorized online gamblingmore precisely sports betting, according to the official terms.
Bryan Cafferelli, commissioner of the DCP, does not mince his words. He points out that none of these entities have a license to offer betting in the state.
However, the matter goes further. Even if these licenses existed, the proposed contracts would violate other state laws. In particular the one prohibiting betting to under 21s. Connecticut recognizes only three legal operators: DraftKings through Foxwoods, FanDuel through Mohegan Sun, and Fanatics through the state lottery.
The platform argument? They present themselves as futures markets, not traditional bookmakers. Kalshi and Crypto.com are regulated by the federal Commodity Futures Trading Commission as designated futures exchanges. Robinhood invokes the same status through its subsidiary Robinhood Derivatives. For these actors, federal supervision takes precedence over state laws.
However, the figures speak for themselves. Around 74% of bets on Kalshi are on sporting events, according to data compiled by Dune Analytics. It is difficult, in these conditions, to deny the “sports betting” dimension of these platforms.
Connecticut regulators seem determined not to let this semantic nuance between “event contracts” and “sports betting” slip by.
A legal battle that goes beyond Connecticut, the future of crypto markets at stake
This offensive is not isolated. It is part of a major trend. New York sent a similar injunction to Kalshi in late October.
The platform responded by suing the state. Massachusetts joined in the dance in September with a lawsuit against Kalshi in local courts. Arizona, Illinois, Montana and Ohio also issued cessation orders this year.
Nevada could be a game changer. A federal judge ruled last month that state regulators have jurisdiction over certain sporting event contracts. This decision weakens the main argument of the platforms: that of exclusive federal jurisdiction. Kalshi announced his intention to appeal. But if this judgment sets a precedent, the entire predictive markets industry could have to comply with state-by-state regulations.
Kalshi counterattacks on federal ground. In a lawsuit filed Wednesday against Connecticut, the company claims the state is encroaching on the federal regulatory framework established by Congress.
It maintains that its event contracts are legal under federal law and fall within the exclusive jurisdiction of the CFTC. A Kalshi spokesperson insists: their platform differs fundamentally from state-regulated bookmakers and casinos.
In short, Connecticut opens a new chapter in the regulation of crypto prediction markets. This offensive marks a hardening of the States in the face of platforms which were advancing on conquered territory. The outcome of these legal battles will determine whether innovation can flourish under federal supervision or whether each state will impose its own rules of the game.
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