Connecticut's regulators are taking a firm stand against prominent financial and crypto platforms, issuing cease and desist orders to Robinhood, Kalshi, and Crypto.com. The move stems from allegations that these platforms are illegally offering sports betting disguised as "event contracts" without the necessary state licenses, raising significant concerns about consumer protection and regulatory oversight.
Connecticut's Crackdown on Unlicensed Betting
The Connecticut Department of Consumer Protection (DCP) sent formal letters to the three entities, asserting they are engaging in unlicensed online wagering, specifically sports betting, through their event contract offerings. Commissioner Bryan Cafferelli emphasized that none of these platforms possess a state license, and even if they did, their contracts reportedly violate numerous state laws, including allowing individuals under 21 to participate. Adding to the gravity, DCP Gaming Director Kris Gilman accused the platforms of "deceptively advertising that their services are legal," highlighting the severe risks consumers face by operating outside the state's regulated environment, where their money and information may lack protection. The state explicitly recognizes only DraftKings, FanDuel, and Fanatics as legally licensed for sports betting, all of which enforce a strict 21-and-over age requirement. The DCP also cited broader concerns, including a lack of technical standards, security protections for personal data, integrity controls to prevent manipulation, and advertising to self-excluded gamblers or college students.
Federal Claims vs. State Scrutiny
In response to Connecticut's actions, Kalshi has mounted a legal challenge, filing a federal lawsuit against the DCP. Kalshi maintains it operates as a "nationally regulated exchange for real-world events," asserting it is subject to "exclusive federal jurisdiction" under the Commodity Futures Trading Commission (CFTC) and that its event contracts are fully legal under federal law. Robinhood echoed a similar defense, stating its event contracts are "federally regulated by the CFTC" and offered through a CFTC-registered entity, ensuring a "safe, compliant, and regulated" environment for retail customers. This clash between state regulators and platforms claiming federal oversight is not isolated; prediction markets, which have seen a surge in popularity and investment, are facing increasing legal scrutiny across the U.S. Kalshi, in particular, is embroiled in legal battles in at least ten states, including cease and desist orders from New York and Massachusetts, illustrating a growing nationwide challenge to the legality and regulation of these evolving financial instruments.
