Connecticut Cracks Down on 3 Prediction Markets as State–Federal Fight Escalates

Connecticut has ordered Kalshi, Robinhood, and Crypto.com to halt event-based contracts immediately, deepening its aggressive stance against digital assets.

The decision exposes a widening regulatory rift between state gambling laws and federal derivatives oversight.

A New Flashpoint in Connecticut’s Anti-Crypto Campaign

Connecticut has issued cease-and-desist orders to Kalshi, Robinhood Derivatives, and Crypto.com, accusing them of running unlicensed online sports betting through event-based prediction contracts.

The Department of Consumer Protection (DCP) claims the platforms violated state gaming laws and put consumers at risk.

The move arrives five months after Governor Ned Lamont signed a bill banning all state-level Bitcoin investments, cementing Connecticut as one of the least crypto-friendly jurisdictions in the US.

While states like Texas, Arizona, and New Hampshire explore Bitcoin reserves and permissive digital-asset frameworks, Connecticut continues to tighten restrictions.

Why the State Says Prediction Markets Are “Illegal Sports Betting”

In its December 3 press release, the DCP said none of the three platforms holds a license to offer wagering in the state.

“…their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21,” read an excerpt in the press release.

Regulators accuse the platforms of:

• Advertising to people on the voluntary self-exclusion list
• Failing to implement integrity controls
• Allowing wagers on events with known outcomes
• Operating outside any consumer-protection framework
• Misleading users into believing the markets are legal investments

“A prediction market wager is not an investment,” said DCP Gaming Director Kris Gilman.

Against this backdrop, the DCP urges the platforms to cease all sports-event contracts and allow Connecticut residents to withdraw funds.

While both Robinhood and Kalshi push back, citing federal oversight, only the latter has filed a federal lawsuit challenging Connecticut’s authority.

Nonetheless, this clash highlights a growing legal fault line between state gambling laws and federal derivatives regulation.

“Unfortunate drama. The conflict between state gambling laws and federal derivatives oversight proves regulatory incoherence,” one user on X (Twitter) remarked.

A Multi-State Wave of Battles Is Forming

Connecticut is not alone. New York is embroiled in its own legal dispute with Kalshi. At the same time, a recent Nevada ruling asserted that state regulators may control sports-based event contracts, undermining the industry’s argument for exclusive federal oversight.

At the same time, the regulatory environment is changing: Polymarket has gained CFTC approval and expanded to more than 20 states, marking a stark contrast with Connecticut’s shutdown orders.

What This Means for Crypto Markets and Prediction Platforms

The crackdown intensifies Connecticut’s divergence from national crypto trends and heightens uncertainty around the legal status of event-based contracts.

With multiple states asserting authority, prediction markets face a complicated and fragmented US regulatory market.

More lawsuits are likely, and the outcome may determine whether prediction markets grow into federally supervised financial products or get treated as state-regulated gambling.

The next milestone will be Kalshi’s federal challenge and whether more states side with Connecticut or follow the Polymarket-plus-CFTC model.