Connecticut Orders Robinhood, Kalshi and Crypto.com to Halt Sports Betting

Connecticut has just taken strong action against three giants of digital finance. Kalshi, Robinhood, and Crypto.com find themselves in the authorities’ sights for offering unlicensed sports betting. An offensive that could reshape the emerging online prediction market.

Prediction Markets Threatened by a Wave of State Regulation

Connecticut’s Department of Consumer Protection does not mince words. On Wednesday, the agency sent cessation orders to three major prediction market platforms: Robinhood, Kalshi, and Crypto.com. 

The accusation is clear. These companies would be running unauthorized online gambling, more specifically sports betting, according to official terms.

Bryan Cafferelli, commissioner of the DCP, spares no words. He reminds that none of these entities hold a license to offer betting in the state. 

However, the issue goes further. Even if these licenses existed, the contracts offered would violate other state laws, notably the one prohibiting betting to those under 21 years old. Connecticut recognizes only three legal operators: DraftKings via Foxwoods, FanDuel via Mohegan Sun, and Fanatics via the state lottery.

The platforms’ 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 markets. Robinhood invokes the same status via its subsidiary Robinhood Derivatives. For these players, federal oversight takes precedence over state laws.

Yet, the numbers speak for themselves. Approximately 74% of bets on Kalshi concern sporting events, according to data compiled by Dune Analytics. Difficult, under 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” pass unnoticed.

A Legal Battle Beyond Connecticut, the Future of Crypto Markets at Stake

This offensive is not isolated. It is part of a strong trend. New York sent a similar injunction to Kalshi at the end of October. 

The platform responded by suing the state. Massachusetts joined in with a lawsuit against Kalshi in local courts in September. Arizona, Illinois, Montana, and Ohio have also issued cessation orders this year.

Nevada could change the game. A federal judge ruled last month that state regulators have jurisdiction over certain sports event contracts. This decision weakens the platforms’ main argument: the exclusive federal jurisdiction. Kalshi has announced its intention to appeal. But if this ruling sets a precedent, the entire prediction market industry could have to comply with state-by-state regulations.

Kalshi fights back on the federal level. In a complaint filed Wednesday against Connecticut, the company argues the state is encroaching on the federal regulatory framework established by Congress. 

It claims its event contracts are legal under federal law and fall under the exclusive jurisdiction of the CFTC. A Kalshi spokesperson insists: their platform fundamentally differs from bookmakers and casinos regulated by states.

In short, Connecticut opens a new chapter in the regulation of crypto prediction markets. This offensive marks a tightening of states’ stance against platforms which had previously advanced on assumed conquered ground. The outcome of these legal battles will determine whether innovation can flourish under federal oversight or if each state will impose its own rules of the game.