Connecticut Orders Robinhood, Crypto.com and Kalshi to Stop Unlicensed Sports Betting
Connecticut’s Department of Consumer Protection and Division of Criminal Justice issued cease-and-desist orders to Robinhood, Crypto.com and prediction-market operator Kalshi, directing them to stop offering outcome-based sports event contracts to state residents. Regulators say these products constitute unlicensed online sports gambling under Public Act 21-23, which limits online sports wagering to the Mashantucket Pequot Tribal Nation, the Mohegan Tribe and the Connecticut Lottery Corporation. The orders require platforms to suspend acceptance of bets from Connecticut users, allow withdrawals and preserve records; civil and criminal penalties may follow for noncompliance. Kalshi — which reports roughly three-quarters of its markets relate to sports — says it will comply and has filed a federal lawsuit arguing that event contracts are derivatives subject to federal oversight (for example, by the CFTC), highlighting a jurisdictional clash between state gambling laws and federal regulators. For crypto traders, expect immediate localized effects: possible withdrawal flows from Connecticut users, reduced liquidity in affected prediction-market products, and shortened availability of event-based crypto contracts on major platforms. The action increases regulatory risk for platforms listing outcome-based or binary-style products and could prompt other states to pursue similar enforcement, potentially lowering volumes for these instruments and encouraging delistings or product design changes to avoid state gambling statutes.
Bearish
The order directly targets platforms offering event-based contracts, restricting access for Connecticut users and raising legal risk for those products across U.S. markets. Short-term impacts likely include user withdrawal flows from affected products and localized liquidity drops, which can widen spreads and reduce tradability for event-based contracts and any associated tokens or market-making positions. Medium-term, platforms may delist or redesign products to reduce legal exposure, lowering available supply and trading volumes for prediction-market instruments. Kalshi’s federal lawsuit introduces regulatory uncertainty: if resolved in favor of federal oversight, some product lines might return under regulatory frameworks, but that outcome is uncertain and could take significant time. Overall, the news increases regulatory risk premium for platforms and traders in prediction markets, leading to reduced activity and a negative pressure on price and liquidity for the specific products and markets tied to these contracts.