Robinhood, Kalshi, And Crypto.com Face Crackdown Over Illegal Gambling Claims

TLDR

Table of Contents

Connecticut regulators demand Robinhood, Kalshi, and Crypto.com stop offering prediction market contracts.
Kalshi and Robinhood defend their operations, claiming federal oversight by the CFTC.
Crypto.com announces new prediction platform despite growing state-level scrutiny.
Connecticut’s cease-and-desist orders follow similar actions from other states like New York and Massachusetts.

Connecticut has joined a growing list of states pushing back against the rise of prediction markets. The Connecticut Department of Consumer Protection sent cease-and-desist orders to Robinhood, Kalshi, and Crypto.com. Regulators claim the companies are running illegal gambling operations by offering event-based contracts, a form of prediction market. Connecticut is the tenth state to challenge Kalshi over such concerns.

Regulatory Orders Target Prediction Market Platforms

On Wednesday, December 3, 2025, Connecticut regulators ordered Robinhood, Kalshi, and Crypto.com to immediately cease offering and advertising sports event contracts to residents.

They were also instructed to allow users to withdraw funds from their platforms. Bryan Cafferelli, the commissioner of Connecticut’s Department of Consumer Protection, emphasized that only licensed entities could provide sports wagering in the state. He pointed out that none of these companies have the necessary licenses and warned that offering such services to individuals under 21 violates state law.

“This is a violation of our state’s gaming laws,” Cafferelli said. “Prediction markets, regardless of their form, are considered illegal gambling if they are not properly licensed.”

Kalshi and Robinhood Defend Their Operations

In response to Connecticut’s cease-and-desist order, Kalshi filed a lawsuit against the state in federal court. The company argues that it operates under federal jurisdiction, governed by the Commodity Futures Trading Commission (CFTC), and not state gaming laws. Kalshi claims that its event contracts are legal under federal law, as the company is a CFTC-regulated derivatives exchange.

Robinhood, which offers event contracts through Robinhood Derivatives, echoed similar points, arguing that their operations fall under the CFTC’s oversight. A spokesperson for Robinhood explained that the company’s offerings are in compliance with federal regulations and that the platforms do not engage in sports betting as understood by state law.

Crypto.com Expands Despite Legal Concerns

Crypto.com has faced increasing regulatory scrutiny but continues to expand its prediction market offerings. On the same day Connecticut issued its cease-and-desist orders, Crypto.com launched a new prediction platform in partnership with sports merchandise giant Fanatics. This platform, Fanatics Markets, offers users the ability to trade on contracts related to sports, finance, economics, politics, and more.

Despite the challenges, Travis McGhee, global head of predictions at Crypto.com, reaffirmed the company’s commitment to expanding its reach. “We are the first to launch sports prediction markets, and our partnership with Fanatics is just one example of our continued innovation in this space,” McGhee said.

The Growing Legal Pressure on Prediction Markets

The actions taken by Connecticut regulators are part of a broader wave of state-level interventions. New York, Massachusetts, Arizona, and Illinois have also issued cease-and-desist orders to Kalshi. The platform is facing ongoing lawsuits in several states, including New Jersey, Maryland, and Nevada. Kalshi is actively contesting these orders, asserting that it operates within the parameters of federal law.

The regulatory challenges highlight the tension between federal and state regulations. While federal agencies like the CFTC have jurisdiction over derivatives and financial contracts, states argue that local laws govern gambling activities. This conflict has led to a growing legal debate over how prediction markets should be regulated.

Limited Legal Alternatives in Connecticut

In Connecticut, only three companies—DraftKings, FanDuel, and Fanatics—are licensed to offer sports betting. These companies must comply with the state’s strict regulations, which include ensuring that users are at least 21 years old.

The state’s consumer protection department has raised concerns about the platforms’ failure to meet these standards, arguing that consumers using unlicensed services may not have adequate protection for their funds or personal information.