Connecticut Bans Robinhood, Kalshi, and Crypto.com: Here’s Why

TLDR:

• Connecticut ordered Robinhood, Kalshi, and Crypto.com to stop offering sports betting to state residents
• Regulators claim platforms operate without required licenses and allow underage wagering activities
• Companies argue federal CFTC oversight covers their prediction market products as derivatives contracts
• State warns consumers face risks from unregulated platforms including data breaches and withheld winnings

Connecticut regulators hit three major platforms with cease and desist orders this week. Robinhood Derivatives, KalshiEX, and Crypto.com face immediate shutdown demands for offering sports wagering without state approval. 

The Department of Consumer Protection issued formal letters to all three companies on December 3. State officials warn consumers about risks tied to unregulated prediction markets.

Platforms Accused of Breaking State Gambling Laws

The Gaming Division claims these companies violate Connecticut’s licensing requirements. None of the three platforms hold permits to operate sports betting in the state. 

Commissioner Bryan Cafferelli stated that only licensed entities may offer such services to residents. The platforms also allegedly allow users under 21 to place wagers.

Director Kris Gilman emphasized the deceptive nature of the companies’ advertising. The platforms promote their services as legal despite state law prohibiting unlicensed operations. 

Connecticut law restricts sports wagering to three approved operators: DraftKings through Foxwoods, FanDuel via Mohegan Sun, and Fanatics partnered with Connecticut Lottery.

Robinhood and Kalshi maintain their products fall under federal oversight. 

Both companies argue the Commodity Futures Trading Commission regulates their event contracts. This defense sets up a potential clash between state and federal jurisdiction. The platforms treat prediction markets as derivatives rather than gambling products.

Wu Blockchain reported the enforcement actions on social media. 

The cease and desist letters target what regulators call “sports events contracts” offered through the platforms. Connecticut law prohibits wagers on events where outcomes may be known to insiders. Examples include award show results and professional team trades.

Consumer Protection Concerns Drive Enforcement Action

State officials highlight multiple risks facing users of these platforms. 

The companies operate outside Connecticut’s technical standards for wagering systems. This leaves personal and financial data vulnerable to breaches. No integrity controls exist to prevent insider trading on event outcomes.

Regulated operators must monitor suspicious betting patterns and block known insiders. These platforms face no such requirements under current operations. 

House rules governing bet settlements receive no regulatory review. Consumers have no recourse if wagers fail to pay out as advertised.

The Department of Consumer Protection cannot recover lost funds from unlicensed platforms. Advertising to individuals on the Voluntary Self Exclusion List violates state law. Marketing on college campuses also breaks Connecticut regulations. 

The platforms must allow residents to withdraw held funds immediately.

Failure to comply triggers civil penalties under the Unfair Trade Practices Act. Criminal charges remain possible for gaming statute violations. 

The three platforms now face decisions about market access versus regulatory challenges. Connecticut’s action may signal broader state pushback against prediction market expansion.

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