Connecticut orders Kalshi, Robinhood and Crypto.com to cease “unlicensed” online sports betting — state alleges their event-contracts constitute illegal gambling
Summary — The Connecticut Department of Consumer Protection (DCP) issued cease-and-desist orders to Kalshi, Robinhood and Crypto.com on December 2, demanding they immediately stop offering, marketing or facilitating “sports-event contracts” to Connecticut residents, citing violations of state gambling and consumer-protection laws. The DCP said the platforms lack the required license and warned that continuing operations could trigger civil or criminal penalties.
What happened: Connecticut clamps down on event-based wagering
- The DCP’s Gaming Division sent letters to KalshiEX LLC, Robinhood Derivatives, LLC, and Crypto.com, declaring their sports-event contract offerings to local users as unlicensed sports wagering.
- The state agency ordered an immediate halt to all advertising, promotion, or facilitation of such contracts for Connecticut residents, and required the platforms to allow users in Connecticut to withdraw any held funds.
- DCP Commissioner Bryan T. Cafferelli emphasized that only licensed entities — namely the tribal-state operators and state lottery under the existing framework — may legally offer sports wagering in Connecticut.
- The regulators argued that event-contracts circumvent required integrity, consumer-protection, and age-restrictions (21+ for wagering) — leaving participants without the safeguards typical of licensed sportsbook platforms.
Industry context: The ongoing dispute between state law and federally regulated derivatives
This action in Connecticut is part of a broader, intensifying conflict across multiple U.S. states over whether event-based contracts — such as those offered by Kalshi, Crypto.com, and Robinhood — constitute lawful financial derivatives or illegal gambling under state statutes.
- The providers argue that their products qualify as derivatives traded on federally regulated exchanges — under the jurisdiction of the Commodity Futures Trading Commission (CFTC) — not subject to state gambling laws.
- In some prior cases, federal courts have sided with Kalshi: for example, a U.S. District Court granted an injunction preventing enforcement actions in New Jersey and Nevada, citing that state efforts may conflict with federal authority over derivatives.
- However, regulatory pushback continues from several states. Just this year, state regulators in Illinois, Maryland, Ohio and others also issued demand letters or cease-and-desist orders to these platforms for allegedly offering unlicensed wagering.
How the firms responded
- Representatives for Kalshi and others have pushed back, stating that their sports-event contracts should be treated as financial derivatives and not as gambling, pointing to CFTC registration and oversight.
- According to reporting, Kalshi argues that only the CFTC — and not state regulators — has authority over its event-based contracts.
- Earlier this year, some platforms — including Robinhood — paused offerings in certain states following regulatory or legal pressure.
What are the concerns from regulators
The Connecticut DCP cites several risks and legal issues with unlicensed sports event contracts:
- Lack of consumer protections: These platforms are not required to meet technical, security or integrity standards mandated for licensed wagering operators — meaning user funds and personal data may be vulnerable.
- No safeguards against insider or manipulative betting: Without regulatory oversight, insiders or participants with privileged information could unfairly influence outcomes.
- No recourse in disputes: As unregulated entities for gambling, there’s no guarantee consumers can recover funds or secure payouts if problems arise.
- Age and licensing violations: Since legal wagering in Connecticut requires participants to be at least 21, and licensed operators only, these platforms — often accessible to users 18+ — would be offering to underage or unlicensed users.
Why this matters — for regulators, platforms, and consumers
- This order signals that state regulators remain determined to enforce traditional gambling statutes — even in the face of federal-level regulatory claims. It underscores the challenge for prediction-market firms to operate consistently across jurisdictions.
- For consumers and investors, the decision serves as a warning that “event-contract” markets are not risk-free — regulatory crackdowns may lead to shutdowns, frozen withdrawals, or legal uncertainty.
- For the broader industry, this may shape how financial regulators and gaming regulators interact. If more states follow suit, it may force a legal reckoning: whether such platforms are financial exchanges or sportsbooks.
- The ongoing legal battles and mixed state responses underscore a critical regulatory gray zone — which could influence how similar platforms design products, choose licensing jurisdictions, and market to users.
What to watch next
- Compliance or withdrawal: Whether Kalshi, Robinhood, and Crypto.com comply with the cease-and-desist orders in Connecticut — including halting offerings and allowing withdrawals — or choose to legally challenge the state’s authority.
- Federal authority vs state regulation: If further federal court rulings uphold platforms’ CFTC-regulated status, that could preempt state laws; conversely, state enforcement and legislation may try to tighten definitions of betting vs derivatives.
- Regulatory cascade: Other states observing Connecticut’s action might follow suit — especially those with tribal licensing frameworks or strict gambling laws.
- Impact on users: For existing users in restricted states, potential loss of access, withdrawal complications, or forced unwinding of positions.
Also Check: World Liberty Financial (WLFI) to launch RWA products in January 2026 — Reuters reports
LKC7CKJV