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Connecticut has ordered Robinhood, Crypto.com, and Kalshi to immediately halt their prediction market offerings, alleging the platforms are operating unlicensed sports betting operations in violation of state gambling laws.
The state’s Department of Consumer Protection issued cease-and-desist orders Wednesday against all three platforms, setting up a high-stakes legal battle over whether federally regulated prediction markets fall under state gaming jurisdiction. Kalshi responded by filing a federal lawsuit arguing Connecticut is attempting to override federal authority.
The Prediction Markets crackdown escalated when Commissioner Bryan Cafferelli declared the platforms had no legal authority to operate wagering activities in Connecticut, stressing that their offerings violated state statutes—including rules banning gambling for residents under age 21.
These companies are offering what is effectively sports betting under a different label, Cafferelli said in the order. They lack the licenses, oversight, and consumer protections required in our state.
Kris Gilman, Connecticut’s Gaming Director, added a sharper critique, accusing the platforms of leveraging misleading advertising and operating completely outside the regulatory system. Gilman warned that consumers were exposed to substantial financial and data security risks.
Connecticut currently licenses just three sportsbooks—DraftKings (Foxwoods), FanDuel (Mohegan Sun), and Fanatics (Connecticut Lottery).
All require compliance with strict age verification and technical standards that, according to the state, Robinhood, Crypto.com, and Kalshi have not met.
In an extraordinary escalation, Kalshi immediately filed a federal lawsuit, arguing that Connecticut’s move violates federal authority.
A company spokesperson insisted the platform is “a regulated national exchange under exclusive CFTC jurisdiction.”
The state is attempting to override the federal framework Congress established, Kalshi said in its filing. The platform argues that event contract markets—unlike sportsbooks—fall within derivatives law, not gaming law.
Robinhood echoed that defense. Its spokesperson said Robinhood Derivatives, LLC is fully registered with the CFTC, adding: Our prediction markets are federally regulated and designed for compliant access by retail customers.
Crypto.com declined to comment, though the state warned any failure to comply with the order could trigger civil or criminal penalties—a threat that deepens the tensions surrounding this fast-growing industry.
As part of the Prediction Markets crackdown, Connecticut regulators laid out a series of risks they say justify the crackdown. The department claimed that the platforms:
lack mandated cybersecurity safeguards,
operate without integrity systems to detect manipulation,
have no regulatory oversight of payout rules,
and advertise to self-excluded gamblers—a major red flag.
Investigators also accused some platforms of allowing bets on events with known outcomes, giving insiders an unfair advantage.
These gaps create unacceptable risks, Gilman said. “Consumers deserve protections that prediction market platforms are currently not providing.”
This Prediction Markets crackdown is not isolated. Connecticut is the newest entrant in a rapidly expanding national conflict.
New York issued its own cease-and-desist to Kalshi in late October, prompting Kalshi to file another lawsuit on October 27.
Massachusetts sued Kalshi in September.
Arizona, Illinois, Montana, and Ohio all issued cease-and-desist orders this year.
Ongoing litigation is active in New Jersey, Maryland, and Nevada, where a federal judge recently ruled that state regulators do have jurisdiction over certain sports-based contracts—a decision Kalshi plans to appeal.
Despite the turmoil, Kalshi announced a staggering $1 billion funding round at an $11 billion valuation, following its highest-ever monthly trading volume in November.
Crypto analyst Emily Carter told Bloomberg: This wave of Prediction Markets crackdown activity shows that regulators are scrambling to keep up with platforms that are evolving faster than state laws. The clash was inevitable.
Regulatory attorney Marcus Ellwood added: Prediction markets are entering a defining moment. Courts will decide whether these products are financial instruments or gambling—and that decision will shape the entire industry.
