Connecticut Orders Kalshi, Crypto.com, Robinhood To Halt “Unlicensed” Gambling

Connecticut has ordered Robinhood, Crypto.com, and Kalshi to halt “unlicensed online gambling” via their prediction market platforms.

The state’s Department of Consumer Protection (DCP) sent letters to the three platforms on Wednesday, highlighting “sports wagering” contracts. 

In the letters, the DCP ordered the three companies ”to immediately cease and desist advertising, offering, promoting, or otherwise making available Contracts or any other form of unlicensed online gambling to Connecticut residents.” 

Crypto.com, Kalshi, And Robinhood Contracts Violate State Laws, Says DCP

DCP Commissioner Bryan Cafferelli said that neither Crypto.com, Kalshi nor Robinhood had the necessary licenses to offer their prediction markets in Connecticut.

He added that even if they did, “their contracts violate numerous other state laws and policies,” which Cafferelli said include allowing individuals under the age of 21 to place bets on events. 

Meanwhile, DCP Gaming Director Kris Gilman has accused the platforms of “deceptively advertising that their services are legal.” 

Gilman added that all three platforms currently operate outside of the state’s regulatory environment and pose “a serious risk to consumers who may not realize that wagers placed on these illegal platforms offer no protections for their money or information.”  

The agency also claimed that the three platforms currently lack integrity controls that would prevent insider betting or manipulation. It claimed in addition that the platforms advertise to self-destructed gamblers and on-college campuses while permitting betting on events with no known outcomes, which they believe gives insiders unfair advantages. 

The legal scrutiny comes amid heightened activity on prediction markets platforms.

Prediction markets volumes (Source: Token Terminal)

Robinhood And Kalshi Respond

A spokesperson for Kalshi said its platform is “a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction.” 

Kalshi also filed a complaint against the state regulator, and claimed that “Connecticut’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges.”

A Robinhood spokesperson said in a statement that “Robinhood’s event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity.” 

Crypto.com has yet to comment. 

DCP Notices Come Just As Polymarket Re-Enters The US Market

The DCP’s cease-and-decist letters come just as Polymarket has re-entered the US market, with the company announcing in the last 24 hours the launch of its US app. 

Polymarket had previously exited the US market as part of a settlement agreement with the CFTC. It is re-entering after acquiring the CFTC-licensed QCX for $12 million in July. 

There are other regulatory threats, as evidenced by the battles that Kalshi is currently embroiled in with several US regulators.

Along with the recent action taken by Connecticut, two neighbouring states have previously taken action. 

New York sent a cease-and-desist notice to Kalshi in October, while the Massachusetts state attorney general sued Kalshi in the state court a month earlier. 

Kalshi has also received similar orders from Arizona, Illinois, Montana and Ohio this year. It remains in ongoing litigation in New Jersey, Maryland and Nevada.

Despite the regulatory challenges, Kalshi announced this week that it has closed a $1 billion funding round at a valuation of $11 billion. Kalshi and Polymarket have also announced a series of partnerships with major firms including the NHL, Google, and the UFC.