Connecticut’s Department of Consumer Protection (DCP) Gaming Division Tuesday announced that it sent cease-and-desist letters to three prediction market platforms, making it at least the 11th state with regulated sports wagering market to issue such a demand.
The agency sent letters to Crypto.com, Kalshi, and Robinhood, telling the platforms to stand down “immediately” and stop “advertising, offering, promoting, or otherwise making available ‘sports event contracts’ or any other form of unlicensed online gambling.” Prediction markets are overseen by the federal Commodity Futures Trading Commission (CFTC) rather than individual states. Sports betting and online casinos have been legal in Connecticut since 2021. DraftKings, Fanatics Sportsbook, and FanDuel operate betting platforms in the state. DraftKings and FanDuel also offer online casino games.
Regulators in two neighboring states previously took action against prediction markets, which many regulators are calling illegal. New York sent out a cease-and-desist to Kalshi in late October, and the company responded within days by suing the state. Massachusetts regulators have not issued a cease and desist to prediction markets, but the state attorney general sued Kalshi in the state court in Sept. 12 and the Massachusetts Gaming Commission Nov. 14 sent a letter warning its licensed operators off offering or working with prediction markets.
In its press release, the DCP threatened the prediction market platforms with civil and criminal penalties should they fail to comply.
“Only licensed entities may offer sports wagering in the state of Connecticut,” said DCP Commissioner Bryan T. Cafferelli via press release. “None of these entities possess a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”
The minimum age for sports betting and online casinos in Connecticut is 21, but the minimum for prediction markets is 18.
DCP: Insider trading a concern
Per a press release from the DCP, the agency considers the prediction markets to be illegal because they are not required to “adhere to Connecticut’s technical standards for wagering platforms,” lack integrity controls and house rules, and advertise to those on the state’s voluntary self-exclusion list as well as on college campuses, both of which are illegal in the state.
In addition, the DCP pointed to two other concerns — prediction markets are not state regulated, so the DCP cannot help resolve consumer issues, and prediction markets leave open the real possibility of consumers trading using insider information.
In the letters, the agency wrote that it views sports event contracts as sports betting “because they allow Connecticut residents to risk something of value for gain by an electronic wagering platform through the placement of wagers on the outcome of live sporting events or portions of a live sporting event, including future events.”
The DCP’s concerns highlight the growing tensions between state-regulated online gambling operations and activity at the federal level that is within the purview of the CFTC, which so far has permitted licensed Designated Contract Markets, for example Kalshi, to expand its menus of sports markets into player props and parlays, traditionally the realm of sportsbooks. These entities also do not pay state taxes.
The DCP did not address how it might handle licensed sports betting operators who choose to enter the prediction market space — Fanatics went live with its prediction market Tuesday, and DraftKings and FanDuel have announced plans to launch. Prediction market Polymarket on Tuesday announced that it is opening its U.S. site for those on its waitlist. The platform is available in other part of the world, and in October posted a contract on whether or not DraftKings would launch predictions this year.
All three have been careful to say they will not operate prediction markets in states in which they have sports betting licenses, but some states have warned that any involvement could result in penalties, up to and including license revocation.
