Connecticut Orders Prediction Markets to Stop, Kalshi Files Lawsuit in Response

The Connecticut Department of Consumer Protection (DCP) has taken action against unlicensed online gambling by issuing a series of cease-and-desist notices to several prediction market platforms.

Key Details

• The DCP has sent legal warnings to KalshiEX LLC, Robinhood Derivatives, LLC, and Crypto.com to restrict unlicensed sports wagering within the state.
• Officials cited concerns about transparency, violations of advertising rules, underage access, and other legal noncompliance.
• Connecticut DCP Commissioner Bryan T. Cafferelli emphasized that only licensed operators may conduct sports wagering, noting that these platforms lack proper authorization and violate multiple state regulations.

Prediction markets have recently drawn attention as states seek to regulate them. The DCP noted that these platforms misrepresent the legality of their services and expose consumers to financial and personal risks, as wagers made on unlicensed platforms do not have protections or guarantees.

Additional concerns highlighted include:

• Noncompliance with Connecticuts technical standards, putting users personal and financial data at risk.
• Absence of regulatory oversight, raising the potential for issues such as nonpayment or exploitation of insider knowledge.
• Offering bets to individuals under 21 and targeting self-excluded individuals and college students, which is prohibited under state law.

Kalshis Legal Response

In response to the cease-and-desist letters, Kalshi has filed a federal countersuit against Connecticut, arguing that state-level enforcement of contracts tied to sports events falls under the Commodity Exchange Act. This approach aligns with Kalshis broader legal strategy in other states, including New York and Ohio, where similar disputes have arisen.

Kalshis move underscores the ongoing tension between state regulators attempting to limit unlicensed prediction markets and companies aiming to expand their presence in sports wagering and predictive trading.

Author: Riley Thompson