Connecticut has intensified its crackdown on prediction markets, issuing cease-and-desist orders to nine companies engaging in what it deems illegal sports-related predictions for customers in the state. The companies named include major players such as Coinbase, Crypto.com, Gemini, Novig, Polymarket, ProphetX, Robinhood, Underdog Predict, and Webull.
The state's Department of Consumer Protection (DCP) has mandated these operators cease all forms of advertising and promote their sports event contracts immediately. Notably, customers in Connecticut will still have the option to withdraw their funds from these platforms. This action also accompanies approximately 30 subpoenas sent to gaming service providers and media outlets as part of the ongoing investigation into these alleged illegal operations.
This latest enforcement action marks a significant expansion beyond earlier efforts focused on Kalshi, a company that has faced legal challenges for purportedly offering unlicensed sports wagering since this past August. While Kalshi contends its contracts are federally regulated swaps, not traditional sports wagers, the DCP's recent actions indicate a broader scrutiny of both popular crypto-finance brands and traditional brokerage platforms offering these types of contracts.
Connecticut Governor Ned Lamont stated, "Connecticut has been at the forefront of this issue, leading the way in protecting consumers—including young people, student athletes, and those suffering from gambling addiction—from unregulated gambling markets, which put your money and information at risk." He emphasized that while prediction markets present themselves as legal and safe, they fail to comply with the state's consumer protection standards, undermining the regulation intended to create a safe sports wagering market established in 2021.
Noncompliance with the cease-and-desist orders could result in civil penalties under the Connecticut Unfair Trade Practices Act, alongside potential criminal consequences due to state gaming laws. The state has also indicated that further judicial action may be on the table.
Connecticut's prior lawsuit against Kalshi sought to restrict operations deemed illegal following a federal court's denial of Kalshi's request for a preliminary injunction against the state's enforcement efforts. Kalshi has appealed this ruling. Meanwhile, communications have occurred between DCP and several companies, including Novig, ProphetX, Gemini, and Webull, as they explore possible compliance measures.
Furthermore, the DCP's action takes aim at the wider ecosystem of prediction markets and how they distribute their services. Nearly 30 subpoenas have also been issued to companies, including Apple’s App Store, Google Play, PayPal, and other payment processing firms that could hold critical data pertaining to the investigation. While these entities are not being directly investigated, the subpoenas underscore the state's determination to examine various facets of the market.
As prediction market products continue to grow significantly, Connecticut highlighted that estimates from the American Gaming Association suggest up to $40 billion could be wagered on NFL-related prediction markets this year. Additionally, one market reportedly recorded nearly $250 million in college football trading volume on the season's opening day.
Consumer Protection Commissioner Bryan Cafferelli reiterated the state’s commitment, stating, "Our laws are clear: sports betting may only be offered by legal, licensed sportsbooks that adhere to our regulations and technical standards." He stressed that the agency will do everything possible to shield Connecticut consumers from misleading practices that could jeopardize their health, safety, and financial security.
On a national scale, the legal landscape surrounding prediction markets has grown increasingly complex, illustrated by a Ninth Circuit Court ruling that rejected federal protections for Kalshi's sports contracts, thereby empowering Nevada to enforce its gambling laws. This decision diverges from an earlier ruling by the Third Circuit regarding New Jersey's ability to regulate Kalshi’s activities, prompting New Jersey to request U.S. Supreme Court intervention in these conflicting interpretations. While this situation can aid Connecticut’s enforcement initiatives, unless resolved by the Supreme Court, operators will continue to face inconsistencies in how laws are applied across different circuits, leading to a fragmented regulatory environment.
