Connecticut Slams Kalshi, Robinhood, Crypto.com with Cease-and-Desist Orders

^{Kalshi got slapped with a cease-and-desist order in Connecticut, along with other prediction market companies Robinhood and Crypto.com. (Photo: SOPA Images Limited / Alamy)}

Connecticut has joined the growing number of states keeping a stern eye on prediction markets and their sports event contracts, issuing cease-and-desist orders to Kalshi, Crypto.com, and Robinhood on Wednesday.

The orders, sent by the state’s Department of Consumer Protection Gaming Division, directed the three companies to cease advertising or offering sports event contracts and any other forms of unlicensed online gambling products to residents of Connecticut.

Connecticut Says Sports Contracts Violate ‘Numerous’ State Laws

Connecticut officials accuse the sites of offering sports betting via their contracts, without the oversight required of licensed products.

“Only licensed entities may offer sports wagering in the state of Connecticut,” wrote DCP Commissioner Bryan T. Cafferelli. “None of these entities possess a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offerings wagers to individuals under the age of 21.”

Kalshi and other prediction markets have faced a growing tide of state regulators who say that the companies are functioning as illegal online sportsbooks. But the prediction sites counter that they have the right to offer such contracts at the federal level under the Commodities Exchange Act, since they are registered with the Commodity Futures Trading Commission (CFTC). 

It’s that same argument that Kalshi is using to sue the Connecticut Department of Consumer Protection.

Kalshi Suing Connecticut Over Federal Preemption

In a complaint filed Wednesday seeking permanent injunction and declaratory relief, Kalshi argued that Connecticut was intruding upon the "federal regulatory framework that Congress established for regulating derivatives on designated exchanges."

But Connecticut officials have found fault not only with the regulatory processes by which they offer their services, but also the state regulations they ignore. In particular, Connecticut officials noted that the prediction markets offer services to those on the state’s self-exclusion list and underage citizens.

“These platforms are deceptively advertising that their services are legal, but our laws are clear,” said Department of Consumer Protection Gaming Director Kris Gilman. “They are also operating outside of a regulatory environment, posing a serious risk to consumers who may not realize wagers placed on these illegal platforms offer no protections for their money or information.”

This isn’t the first state in which Kalshi has turned to legal action in order to battle a cease-and-desist order. A similar process is playing out in New York, though the company previously earned preliminary injunctions in both New Jersey and Nevada. However, Kalshi was once again ordered to follow Nevada gaming laws by a federal judge in late November.

On the same day, a federal class action lawsuit was filed in the Southern District of New York, claiming that Kalshi has misrepresented how its sports event contract markets work to consumers.

Currently, only three companies are licensed to offer online gambling in Connecticut. Both DraftKings and FanDuel offer sports betting and online casino services, while Fanatics operates a third online sportsbook in conjunction with the Connecticut Lottery.