Connecticut Orders Kalshi, Robinhood, and Crypto.com to Stop 'Unlicensed' Online Betting

The Connecticut Department of Consumer Protection has instructed Robinhood, Crypto.com, and the prediction market Kalshi to suspend their activities, citing unlicensed online sports wagering within the state.

In a statement released Wednesday, the agency's Gaming Division confirmed it sent cease-and-desist letters to the three platforms, ordering them to stop offering "sports event contracts" to Connecticut residents and ensure that users can withdraw any existing funds. Authorities warned that failing to comply could result in civil fines and criminal penalties under state gaming and consumer protection laws.

Only licensed operators are permitted to provide sports betting in Connecticut. None of these companies hold such a license, said Department of Consumer Protection Commissioner Bryan T. Cafferelli. He added that even if the companies were licensed, their offerings would still violate multiple state laws and policies.

The decision intensifies a nationwide debate on whether app-based prediction markets should be treated as gambling under state law or as federally regulated financial derivatives. By including Robinhood and Crypto.com alongside Kalshi, regulators are signaling an increasing willingness to classify blockchain-based, outcome-driven financial products as sports betting.

Kalshi responded by stating that it operates as a federally regulated exchange for real-world events and is subject to exclusive federal oversight. The company emphasized that its services differ significantly from traditional state-regulated sportsbooks and casinos, and noted that it has filed a federal lawsuit challenging the states action.

Approximately 74% of Kalshi's contracts involve sports-related markets, according to Dune analytics. Meanwhile, Connecticuts gaming regulators, Crypto.com, and Robinhood have yet to provide further comment.

The cease-and-desist order arrives amid ongoing legal and regulatory challenges. Last month, Kalshi gained relief in Nevada when a federal judge ruled that the company could not face prosecution under the states gambling laws while its legal challenges proceed. In October, a federal court denied Crypto.coms request for a preliminary injunction, leading the platform to pause its sports-event markets in Nevada during its appeal.

Connecticuts online gambling framework originates from SB 146, passed during the 2021 legislative session. The law established a tightly controlled licensing system for online sports betting, casino gaming, lottery sales, and keno. Only three master license holders are allowed to operate statewide: the Mashantucket Pequot Tribal Nation, the Mohegan Tribe, and the Connecticut Lottery Corporation.

The licensing structure was codified under Public Act 21-23, granting exclusive rights for online casino gaming and two of the three statewide sports betting skins to the tribes, with the remaining sports betting license assigned to the state lottery. Following federal approval of the tribal-state compact amendments, the Connecticut Department of Consumer Protection issued implementing regulations in February 2022.

Analysis: Connecticut's Push Against Unlicensed Online Sports Wagering

The recent move by the Connecticut Department of Consumer Protection (DCP) to order Robinhood, Crypto.com, and Kalshi to suspend their sports betting services marks a significant moment in the ongoing debate over online sports wagering and prediction markets. The DCP has issued cease-and-desist orders, asserting that these platforms have engaged in unlicensed sports betting within the state. According to Commissioner Bryan T. Cafferelli, only licensed operators can legally offer such services, and the companies involved lack the necessary state-issued permits to operate. The implications of this decision are far-reaching, especially as the lines between federally regulated financial products and state-regulated gambling continue to blur.

This action reflects a broader trend where regulators are increasingly scrutinizing blockchain-based platforms and app-based prediction markets. Kalshi’s defense—that it operates as a federally regulated exchange for real-world events—introduces a key question: should prediction markets, even when involving sports outcomes, be treated under state gambling laws or as federally overseen financial instruments? This legal ambiguity is not isolated to Connecticut. Other states, like Nevada, have already seen similar legal challenges surrounding these platforms. Kalshi has even filed a federal lawsuit to contest the state's cease-and-desist order, signaling a protracted legal battle that could reshape the regulatory landscape for this industry.

As the state of Connecticut continues to enforce its tightly regulated gambling framework, it raises the question of whether current laws are adequate to address the emerging challenges posed by new financial products such as sports event contracts. With a licensing system that heavily favors the Mashantucket Pequot and Mohegan tribes, the state’s approach has already limited competition within the online gambling space. As regulators across the country grapple with the rise of blockchain-based betting and prediction markets, Connecticut’s action will likely serve as a pivotal moment for setting the tone of future regulatory efforts.

Sources:

• Connecticut Orders Kalshi, Robinhood, and Crypto.com to Halt 'Unlicensed' Online Gambling