In brief
- Connecticut’s consumer protection agency directed Robinhood, Crypto .com and Kalshi to stop offering sports event contracts to residents.
- The state warned that continuing operations could trigger civil penalties and potential criminal exposure under gaming laws.
- The action arrives as courts weigh whether prediction markets fall under gambling statutes or federal derivatives oversight.
Connecticut’s Department of Consumer Protection has ordered Robinhood, Crypto.com, and prediction market Kalshi to halt operations over what it has labelled as unlicensed online sports gambling in the state.
In a notice released Wednesday, the agency’s Gaming Division said it issued cease-and-desist letters directing all three platforms to stop offering “sports event contracts” to Connecticut residents and allow local users to withdraw their funds.
The department warned that noncompliance could trigger civil penalties and criminal sanctions under state gaming and consumer protection laws.
Only licensed entities “may offer sports wagering in the state of Connecticut, none of these entities possess a license to offer wagering in our state,” Department of Consumer Protection Commissioner Bryan T. Cafferelli said in a statement.
“Even if they did, their contracts violate numerous other state laws and policies,” Cafferelli added.
The move deepens a national fight over whether app-based prediction markets should be regulated as gambling products under state law or as derivatives under federal oversight.
Bringing Robinhood and Crypto.com into the same action as Kalshi also signals that regulators are increasingly willing to treat on-chain, outcome-based financial products as sports betting.
“As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction,” a company spokesperson told Decrypt.
Kalshi’s services are “very different from what state-regulated sportsbooks and casinos offer their customers,” they said, noting that they have filed suit in federal court.
Roughly 74% of bets on Kalshi are for sports-related markets, according to a Dune dashboard.
Decrypt has reached out to the Department of Consumer Protection, Crypto.com, and Robinhood for comment.
The Federal fight
The cease-and-desist order comes as these platforms continue to address issues related to gambling law and federal derivatives regulation.
Right before Thanksgiving last week, Kalshi secured relief in Nevada after a federal judge ruled that Kalshi could not be prosecuted under that state’s gambling statutes while it pursues a challenge against regulators.
In October, a U.S. federal court denied Crypto.com’s request for a preliminary injunction, and the platform agreed to suspend all sports-event market operations in Nevada while it appeals.
Connecticut’s modern online gambling framework traces back to SB 146, introduced in the 2021 legislative session. It authorized online sports wagering, online casino gaming, online lottery sales, and online keno under a tightly controlled licensing structure.
The bill’s language codified that only three “master wagering license” holders could operate statewide: the Mashantucket Pequot Tribal Nation, the Mohegan Tribe, and the Connecticut Lottery Corporation.
The statutory structure was later enacted as Public Act 21-23, which formalized the tribal-state compact amendments granting the tribes exclusive rights to online casino gaming and two of the three available statewide sports betting skins, while assigning the third sports betting license to the state lottery.
Following the law’s passage and the Department of the Interior’s federal approval of the compact amendments, the Connecticut Department of Consumer Protection issued detailed implementing regulations in February 2022.
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Source: https://decrypt.co/350874/connecticut-kalshi-robinhood-crypto-com-halt-unlicensed-online-gambling
