Connecticut Halts Unlicensed Online Gambling by Kalshi, Robinhood, and Crypto.com

Connecticut's Department of Consumer Protection has issued a stop order to Kalshi, Robinhood, and Crypto.com, accusing them of operating unlicensed online gambling within the state. This order primarily addresses sports-style “prediction” products, which state officials consider to be illegal wagers.

Key Takeaways

Connecticut's regulatory officials have ordered Kalshi, Robinhood, and Crypto.com to cease operations, citing illegal online gambling activities.
The firms lack proper licenses to offer sports betting in Connecticut, and their services are deemed deceptive and potentially harmful to consumers.
The state warns of integrity issues regarding the types of bets offered, with concerns over unregulated payout practices and the safety of personal data.
Only three operators are authorized to conduct sports betting in Connecticut: DraftKings, FanDuel, and Fanatics.

Robinhood

Connecticut’s Cease-and-Desist Order Explained

On Wednesday, Connecticut's Department of Consumer Protection directed KalshiEX LLC, Robinhood Derivatives LLC, and Crypto.com to stop engaging in what officials describe as unlicensed online gambling. The cease-and-desist letters indicate that these companies are offering unauthorized sports wagers in violation of state gaming laws.

The order encompasses “sports event contracts” and any related forms of online gambling provided to residents of Connecticut.

Authority Statement on Legal Sports Wagering

“Only licensed entities are permitted to offer sports wagering in Connecticut,” stated Consumer Protection Commissioner Bryan T. Cafferelli. He reiterated that none of the three companies hold the necessary licenses. Furthermore, even if they were licensed, the contracts they provide would still infringe upon regulations that restrict betting for individuals under 21.

Gaming Director Kris Gilman highlighted the misleading nature of their marketing, indicating that the firms falsely advertise their services as legal. She pointed out that these businesses operate outside state regulations and pose significant risks to consumers who may not be aware of their lack of protections.

“A prediction market wager is not an investment,” Gilman clarified, distinguishing between financial trading and gambling.

Unregulated House Rules Raise Concerns

Regulators argue that the unlicensed nature of these products raises multiple issues regarding integrity and consumer protection. Since the platforms do not adhere to Connecticut's technical wagering standards, users’ financial and personal information may be more vulnerable to issues such as failures or exploitation.

Additionally, there are no required integrity measures in place, meaning there's a lack of controls to prevent insiders from placing bets on events where they possess advanced knowledge or influence over the outcomes. In contrast, licensed operators must implement measures to prevent insider betting and monitor unusual wagering activities.

The Department also warned that without a regulatory authority to review the house rules governing payout procedures, customers could face challenges in recovering funds or addressing disputes related to unexpected bet settlements.

Doubts About Insider Influence on Betting Outcomes

Connecticut officials raised objections regarding the types of events featured on these platforms. They noted that many wagers pertain to outcomes known or heavily influenced by a limited group of insiders, such as award ceremonies and professional team trades. Connecticut law explicitly prohibits betting on events with predetermined outcomes, as this is considered unfair to average bettors.

The department alleges the companies have promoted and offered wagers to individuals on the state's Voluntary Self-Exclusion List, those under 21, and even actively advertised on college campuses, all of which contradict Connecticut law.

Immediate Actions Required from the Companies

Under the cease-and-desist orders, Kalshi, Robinhood, and Crypto.com must halt all advertising, offerings, or promotions of sports event contracts and other forms of unlicensed online gambling directed at Connecticut residents. Furthermore, they are required to allow residents to withdraw any funds currently deposited on their platforms.

Failure to comply with these orders may result in civil penalties under the Connecticut Unfair Trade Practices Act and could lead to criminal charges for violations of the state's gaming laws.

For now, Connecticut reminds its residents that only three operators are legally authorized to take sports bets in the state: DraftKings through Foxwoods, FanDuel through Mohegan Sun, and Fanatics through the Connecticut Lottery, with a required minimum age of 21 for sports betting and 18 for fantasy contests.