Connecticut regulators have issued cease-and-desist orders to Robinhood, Crypto.com, and Kalshi, halting their operations for offering unlicensed sports event contracts, classified as illegal online sports gambling to state residents. Users must withdraw funds, with penalties for noncompliance under state gaming laws.
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Connecticut Department of Consumer Protection targets unlicensed platforms: Robinhood, Crypto.com, and Kalshi face immediate shutdown for sports wagering violations.
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Only licensed entities like tribal nations and the state lottery can operate sports betting in Connecticut, per state law.
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Approximately 74% of Kalshi’s bets involve sports markets, highlighting the overlap between prediction platforms and gambling regulations.
Connecticut halts Robinhood, Crypto.com, and Kalshi over unlicensed crypto gambling. Learn how state laws regulate sports event contracts and what it means for prediction markets. Stay informed on crypto regulations today.
What is the Connecticut Cease-and-Desist Order Against Robinhood, Crypto.com, and Kalshi?
The Connecticut cease-and-desist order against Robinhood, Crypto.com, and Kalshi requires these platforms to immediately stop providing sports event contracts to Connecticut residents, deeming them unlicensed online sports gambling. Issued by the Department of Consumer Protection’s Gaming Division, the notice mandates that users withdraw their funds while warning of civil penalties and criminal sanctions for violations. This action enforces the state’s strict licensing framework for wagering activities.
How Do State Regulators Classify Prediction Markets as Gambling?
State regulators in Connecticut view prediction markets like those on Kalshi, Robinhood, and Crypto.com as forms of sports wagering when they involve betting on real-world sports events. The Department of Consumer Protection argues that these platforms lack the required licenses, which are exclusively held by the Mashantucket Pequot Tribal Nation, the Mohegan Tribe, and the Connecticut Lottery Corporation. According to a statement from Commissioner Bryan T. Cafferelli, even if licensed, these contracts violate additional state laws and policies designed to protect consumers from unregulated gambling.
This classification stems from Connecticut’s Public Act 21-23, enacted in 2021, which authorizes online sports betting only through approved entities. The law, approved by the Department of the Interior, ensures a controlled environment for gaming activities. Regulators’ stance reflects a broader national debate, where app-based prediction markets are scrutinized as either gambling under state jurisdiction or derivatives under federal oversight by the Commodity Futures Trading Commission.
Frequently Asked Questions
What Platforms Are Affected by Connecticut’s Crypto Gambling Cease-and-Desist?
The Connecticut Department of Consumer Protection has targeted Robinhood, Crypto.com, and Kalshi with cease-and-desist letters for offering unlicensed sports event contracts. These platforms must cease operations for state residents and facilitate fund withdrawals, as they do not hold the necessary gaming licenses under state law.
Why Is Kalshi Challenging Connecticut’s Gambling Regulations?
Kalshi operates as a regulated exchange for event-based contracts under federal jurisdiction, distinct from traditional sportsbooks. A company spokesperson emphasized that about 74% of its markets relate to sports, but it has filed a federal lawsuit arguing exclusive oversight by national regulators, not state gambling laws, to continue serving users legally.
Key Takeaways
- Strict Licensing Enforcement: Connecticut limits sports wagering to three licensed entities, excluding platforms like Robinhood and Crypto.com from operations.
- Prediction Markets Under Scrutiny: Regulators increasingly treat outcome-based crypto products as gambling, impacting 74% sports-related bets on Kalshi.
- Federal vs. State Jurisdiction: Platforms are pursuing legal challenges to affirm federal derivatives regulation over state gambling controls.
Conclusion
The Connecticut cease-and-desist order against Robinhood, Crypto.com, and Kalshi underscores the evolving landscape of crypto gambling regulation, where prediction markets face heightened state oversight. By enforcing Public Act 21-23, authorities aim to safeguard consumers through licensed wagering only. As federal challenges unfold, platforms may seek broader exemptions, but users should monitor state-specific rules to navigate these restrictions effectively and stay compliant with gaming laws.
The regulatory action highlights ongoing tensions in the crypto space, particularly around sports event contracts and their classification. Commissioner Bryan T. Cafferelli’s remarks emphasize the need for compliance, noting violations extend beyond licensing to core state policies. This development follows similar disputes in Nevada, where Kalshi recently gained temporary relief from a federal judge against gambling prosecutions. In October, Crypto.com suspended Nevada operations after a court denied its injunction request, illustrating a pattern of legal battles.
Connecticut’s framework, established via Senate Bill 146 in 2021, created a tightly regulated online gambling ecosystem. Implementing regulations from February 2022 detail operations for approved holders, ensuring tribal compacts and lottery rights remain intact. This structure prevents unauthorized entities from entering the market, protecting revenue streams for state and tribal partners.
From a broader perspective, the inclusion of mainstream platforms like Robinhood alongside crypto-focused ones signals regulators’ intent to apply uniform standards to digital financial products resembling bets. Kalshi’s Dune dashboard data reveals the heavy reliance on sports markets, fueling arguments for gambling categorization. While platforms assert federal preemption, states like Connecticut prioritize local consumer protection statutes.
Users in affected states should promptly review account statuses and initiate withdrawals to avoid complications. The Department of Consumer Protection has not yet responded to further inquiries, but the initial notice sets a firm tone against unlicensed activities. This case may influence how other jurisdictions approach crypto-based prediction tools, potentially leading to nationwide standardization efforts.
Experts in financial regulation, such as those cited in reports from COINOTAG, point to the blurred lines between derivatives trading and wagering. A Kalshi representative reiterated the platform’s regulated status, distinguishing it from casino-style offerings. As litigation progresses, outcomes could redefine boundaries for crypto platforms offering event contracts, balancing innovation with oversight.
