Connecticut regulators have taken direct aim at the fast-growing prediction market industry. The state’s Department of Consumer Protection (DCP) has issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com, requiring them to immediately stop offering sports-related event contracts to Connecticut residents.
Officials argue that these products constitute unlicensed online gambling, placing them squarely in violation of state wagering laws.
State Regulators Call It Illegal Gambling
At the center of the dispute is Connecticut’s classification of these sports-event contracts as sports wagering, which requires a state license to operate. According to the DCP, the three companies have been offering contracts tied to sports outcomes without meeting any of the regulatory requirements imposed on legal sportsbooks.
The agency also highlighted several violations, including offerings accessible to users under the age of 21, failure to meet platform integrity and technical standards, and the absence of protections designed to prevent insider wagering. Regulators warned that unlicensed platforms lack basic consumer safeguards, leaving users exposed and providing no recourse if funds are lost or disputes arise.
Companies Point to Federal Oversight, Not Gambling
Kalshi and Robinhood have pushed back on these characterizations, arguing that their event-based markets fall under federal derivatives regulation, not gambling law. Both companies maintain that the contracts are regulated by the Commodity Futures Trading Commission (CFTC), framing them as financial instruments rather than wagers.
This clash reflects a growing divide between state-level gambling authorities and a new class of prediction-market platforms that view themselves as part of the broader digital-asset and derivatives ecosystem rather than traditional sportsbooks.
A Broader Regulatory Conflict Emerging
The dispute also underscores the widening gap between prediction markets and state-regulated sportsbooks such as FanDuel, DraftKings, and Fanatics, which operate legally in Connecticut under strict licensing conditions. While these sportsbooks fall neatly into state gambling frameworks, the newer derivatives-style platforms challenge traditional definitions, prompting regulators to determine where they fit within the law.
Earlier in 2025, the CFTC also scrutinized Crypto.com’s sports-linked products, requesting a pause in trading, another sign that prediction markets are increasingly caught between competing regulatory regimes.
Part of Connecticut’s Escalating Enforcement Strategy
The cease-and-desist orders follow a broader pattern of aggressive enforcement in the state. Just five months earlier, Governor Ned Lamont signed legislation tightening gambling oversight, and in 2024 the state banned offshore betting platform Bovada, issuing its own cease-and-desist in June.
Connecticut’s latest move signals that regulators intend to apply their gambling laws assertively to digital-asset platforms offering sports-linked contracts, even when those companies claim federal oversight. As prediction markets grow in popularity, this regulatory tug-of-war between state gambling frameworks and CFTC-regulated derivatives venues is becoming increasingly difficult for platforms to navigate.
