The state Department of Consumer Protection (DCP) has taken a stand against prediction markets in Connecticut and issued Robinhood, Crypto.com and Kalshi with cease-and-desist letters.
The statement from the DCP is unequivocal in its assessment of the illegality of the operators' products and claims that all three are conducting unlicensed online gambling, particularly in relation to its sports event contracts.
Sports betting has been legal in Connecticut since October 2021 and is overseen by the Gaming Division of the DCP, which has made this legal complaint on the basis that "it is illegal for a for-profit organization to operate without an appropriate license."
On the three accused companies, DCP Commissioner Bryan T Cafferelli has stated: "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 offering wagers to individuals under the age of 21."
This comment is supported by DCP Gaming Director Kris Gilman, who added: "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. A prediction market wager is not an investment."
While the operators' sports event contracts are particularly under the microscope on this occasion, the DCP has ordered them to withdraw advertising and availability of all and any 'form of unlicensed online gambling to Connecticut residents."
The three prediction market firms are no strangers to cease and desist letters and have all been subject to similar legal contestation in other states, with mixed fortunes.
Kalshi has tended to take an aggressive stance, frequently applying for preliminary injunctions against state regulators on the basis that the company is already regulated federally by the CFTC.
This approach has had some success, though notably the courts in Nevada, having initially approved the injunction, later dissolved it, forcing Kalshi to exit the state.
Despite defeats such as this, Crypto.com and Kalshi have both announced major growth developments in the same week that these cease and desists were posted.
Kalshi has received $1bn of investment at an $11bn valuation, while Crypto.com is powering Fanatics new prediction market product, which has now gone live in 10 states with plans to enter 14 more.
Though for now, the operators seem undeterred, the DCP has stated that failure to comply could result in additional action "including, but not limited to, civil penalties under the Connecticut Unfair Trade Practices Act and/or criminal penalties for violations of Connecticut's gaming statutes."
Further justifications for these measures include the platforms' lack of adherence to Connecticut's technical standards for wagering platforms, deficiency of integrity controls and unregulated house rules.
The regulator has also raised concerns over there being no official recourse to recoup lost funds for customers, the potential for insider trading and the fact that individuals under 21 and those on the voluntary self-exclusion list are still being advertised to.
There are three licensed sports betting operators in Connecticut, DraftKings, FanDuel and Fanatics
