Last week, the Connecticut Department of Consumer Protection (DCP) issued a red card to three well-known platforms, Crypto.com, Kalshi, and Robinhood, ordering them to immediately cease offering and promoting sports event contracts in the state. This order, issued on December 2, marks the state's tightening of regulatory reins on the emerging prediction market, in line with states like New York and Massachusetts.
State regulators flash a red light, citing multiple violations
The Connecticut DCP clearly stated that only licensed entities are legally allowed to provide sports betting services in the state. The aforementioned platforms not only lack state licenses, but their business models also allegedly violate a series of local laws. For example, the legal age for sports betting in Connecticut is 21, but these platforms set the threshold as low as 18. Moreover, they are also accused of advertising to individuals on the state's voluntary self-exclusion list for gambling and on college campuses, which are explicitly prohibited by state law.
Regulatory officials bluntly stated that these platforms circumvent the integrity controls, consumer protection, and other core standards that licensed operators must adhere to, operating in a regulatory vacuum. Chris Gilman, the head of gambling in Connecticut, warned, "They deceptively promote their services as legal, but our laws are clear. This poses a serious risk to consumers, whose funds and information are unprotected on illegal platforms."
Platform counterattacks and legal disputes, jurisdiction becomes the focus
In response to the ban, Kalshi reacted quickly and has filed a lawsuit in the Connecticut state court to prevent the enforcement of the ban. Kalshi's core argument is that its sports event contracts are governed by the Commodity Exchange Act and are "swap" contracts regulated by the U.S. Commodity Futures Trading Commission (CFTC), thus state gambling laws have no jurisdiction. This defense strategy mirrors its previous lawsuit in Massachusetts, aiming to use federal regulations as a shield against state regulation.
However, state regulatory agencies are not convinced. In addition to licensing and age issues, the DCP also specifically emphasized the risk of insider trading—that users might use non-public information to trade on event contracts, thereby gaining an unfair advantage. This highlights the increasingly prominent contradictions between state consumer protection laws and the federal financial regulatory framework in the rapidly evolving prediction market field.
Future trends: The entry of traditional gambling giants and regulatory struggles
This action in Connecticut is not an isolated incident. States like Illinois, Maryland, and New Jersey have also taken similar measures against the prediction market. Meanwhile, an interesting phenomenon is occurring: licensed sports betting giants native to Connecticut, such as DraftKings and FanDuel, have begun offering their prediction market contracts in permitted states.
This means that the future market may present a scenario where "regular forces" and "innovators" coexist. But in states like Connecticut with mature regulatory frameworks, the bottom line is very clear: any form of betting activity must operate within its set rules framework. This tug-of-war over the legal nature of the prediction market is likely to continue. For more in-depth analysis of global regulatory dynamics, extend your reading on the PASA official website.
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