Connecticut Goes After Prediction Markets, Orders Them to Halt Operations

The Connecticut Department of Consumer Protection has issued a warning against Kalshi, Robinhood, and Crypto.com, ordering them to stop offering prediction markets in the state.

This warning comes at an important time for the companies, as Kalshi has recently concluded a funding round, sending its valuation to $11 billion, and launching a partnership with CNN.

Connecticut Joins States to Oppose Prediction Markets

In a statement published on Wednesday, the department said that the platforms now had to comply with cease-and-desist letters addressed to them directly, and that they ought to stop offering sports event contracts to Connecticut residents.

According to the department, these markets are a form of unregulated gambling, and a failure to comply would result in criminal sanctions based on state gaming and consumer protection laws.

Prediction market platforms have repeatedly claimed that they are not subject to local gambling laws, but pushback from regulators, including in Nevada, has been consistent.

Some companies pursuing prediction markets of their own, such as Underdog, DraftKings, Fanatics, and FanDuel, have even been willing to exit sports betting markets in order to pivot towards prediction offers of their own.

The department and Commissioner Bryan T. Cafferelli said that any entity that offers sports wagering in the state ought to be licensed to do so. The argument stems from an understanding that Kalshi and others are, in fact, offering a sports betting product in the gaming regulators’ interpretation.

The CFTC vs Gaming Laws and Regulations Argument

However, this has been dismissed by the firms. In a statement to the media outlet, Decrypt, a Kalshi spokesperson said:

“As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction.”

A new lawsuit is now seeking to challenge this definition, with the plaintiffs specifically targeting the language used by companies and saying that they claim regulation under CFTC laws to continue offering “illegal gambling products” masked as a “financial service.”

This argument has been the main line of defense for prediction markets. Despite the strong pushback, though, companies such as Kalshi remain confident that they are going to overcome the current setbacks and operate well across the nation, proving that they are financial services and therefore not subject to local gaming laws.