Connecticut Targets Kalshi, Robinhood and Crypto.com Over Sports Contract Violations

Connecticut’s Department of Consumer Protection (DCP) has KalshiEX LLC, Robinhood Derivatives, and Crypto.com to stop doing business in the state. They say that all three companies are marketing illegal “sports event contracts” to state citizens.

The government says these contracts constitute illicit internet gambling in Connecticut, since only state-approved operators may offer sports betting.

The DCP told the companies they had to stop advertising, promoting, or entering into these contracts in Connecticut right away. They also had to let consumers in the state withdraw their money without limits. Regulators made it clear that none of the platforms have the state licenses they need to offer .

Regulators List The Risks To Consumer Protection

Connecticut regulators said in the order that the platforms were not following the rules that must follow. The DCP said that without regulatory oversight, consumers have “no guaranteed recourse” if there are difficultys with payouts, technical issues, or mismanagement of funds.

The state also said the platforms were difficultyatic because they let people bet on outcomes that aren’t traditional sports results, including club management decisions and awards. They said that these kinds of events make it more likely that people will cheat.

Connecticut also raised concerns that the platforms’ advertising may have reached anyone under 21, those on the state’s self-exclusion list, or students on college campuses, all of which are against state gaming and advertising rules.

Businesses Push Back, Cite Federal Control

Kalshi has fought back by taking the cease-and-desist injunction to federal court. The platform says its contracts are not covered by state gaming law but by federal derivatives law, which the overviews.

The paper says that analysts think this case could be a significant test of whether federally regulated event-based derivatives are subject to state gaming laws. 

and Crypto.com are in similar positions, meaning their event-contract offerings are part of CFTC-registered derivatives activity.

Analysts say that platforms in this area are increasingly relying on federal classification to shield themselves from state-level gaming enforcement. This tension is getting worse as prediction markets proliferate.

A National Crackdown That is Getting largeger

Connecticut’s action is part of a larger effort across the to push back against regulations. Several states have recently begun looking into or warning about new prediction-market platforms that make it hard to distinguish between gambling and financial derivatives.

Analysts argue that these measures show the states want to defend their regulated sports-betting markets, especially since new fintech and crypto companies are launching products that look like bets but lack official approval.

The Connecticut DCP said that any unregistered operator who offers event-based betting to residents “will face enforcement action.”

Coming Up: Legal Fights

Now that Kalshi has filed a lawsuit, the case is likely to challenge the limits of state gaming law and federal derivatives regulation. Legal experts think the verdict could change how prediction markets are viewed nationwide, especially those involving , derivatives, and online betting.

Connecticut’s decree makes it clear that only state-licensed sportsbooks can conduct sports betting. Also, contracts sold through financial or crypto platforms will be considered illegal gambling unless proven otherwise.