Kalshi, Polymarket and Robinhood Face New State Pressure

Connecticut has opened a new front in the escalating battle over prediction markets in the United States, issuing cease-and-desist orders on Wednesday to Robinhood, Kalshi and Crypto.com for what the state calls unlicensed sports wagering.

In three separate notices sent by the Connecticut Department of Consumer Protection (DCP), regulators accused the companies of “conducting unlicensed online gambling, more specifically sports wagering,” and ordered an immediate halt to advertising, offering, or promoting any such contracts to state residents. 

The letters mark one of the strongest state-level moves to date against the fast-growing sports-event prediction market industry, which has surged in visibility as both crypto-native and traditional platforms expand aggressively.

DCP Commissioner Bryan T. Cafferelli said the companies’ offerings not only lack required state licenses but also violate additional rules, including provisions prohibiting wagers by individuals under 21. “None of these entities possess a license to offer wagering in our state,” Cafferelli said. “Their contracts violate numerous other state laws and policies.”

Companies Push Back With Federal-Oversight Argument

Robinhood immediately challenged Connecticut’s stance, arguing that its event-contract products fall under exclusive federal jurisdiction—not state gambling law.

“As we’ve previously shared, Robinhood’s event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity, allowing retail customers to access prediction markets in a safe, compliant, and regulated manner,” a spokesperson said in a statement.

Kalshi, which also operates under federal oversight as a designated contract market (DCM), echoed that position. 

“As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction,” said Kalshi spokesperson Jack Such. “It’s very different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments and have filed suit in federal court.”

The companies’ responses shed light on a core legal tension defining the prediction-market debate: whether event-contract platforms regulated by the Commodity Futures Trading Commission (CFTC) should be treated as futures exchanges or as unlicensed sportsbooks when markets relate to sports outcomes.

A Growing Interstate Fight

Connecticut’s move comes as neighboring New York is locked in its own battle with Kalshi over similar issues. Kalshi is currently suing New York state regulators, arguing that the state’s attempt to block its political and sports-related markets unlawfully conflicts with CFTC authority.

Meanwhile, a federal court decision in Nevada last month complicated the regulatory picture. A judge ruled that state gambling regulators do have jurisdiction over certain sports-based event contracts, a ruling seen as weakening the argument that federal oversight preempts state laws. Kalshi, which was involved in that case, has signaled it plans to appeal.

The wave of state enforcement is unfolding at a moment of renewed momentum in the prediction-market sector. 

On the same day Connecticut issued its cease-and-desist orders, Polymarket—widely viewed as the largest crypto-native event-prediction platform—quietly rolled out its app to users in more than 20 U.S. states, signaling preparations for its broader official relaunch in the country.

What Next?

Connecticut’s orders will likely intensify the national tug-of-war between federal agencies that oversee derivatives markets and state regulators who see sports-related prediction contracts as gambling products that fall squarely under their jurisdiction. 

With multiple lawsuits now active across the country—and a patchwork of rulings emerging—the legal status of sports event contracts remains unsettled.

For now, the DCP’s action signals that more states may soon follow, especially as prediction markets grow in popularity among retail traders, crypto users and sports bettors alike. Whether future courts side with federal-regulated platforms or with state gambling authorities could determine how the entire U.S. prediction-market landscape evolves in 2025 and beyond.