Key Moments:
- On December 2, Connecticut’s DCP sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com regarding unlicensed sports-related event contracts
- Kalshi responded by filing a lawsuit and seeking an injunction in Connecticut District Court the next day
- Robinhood and Crypto.com have not taken legal action as of the time the article was written
State Enforcement Actions Target Sports Event Markets
On December 2, Connecticut’s Department of Consumer Protection (DCP) sent cease-and-desist letters to Robinhood, Kalshi, and Crypto.com. The agency argued that their sports-related event contracts for Connecticut residents amount to unlicensed sports wagering under state law. In addition, the letters reminded platforms that any sports wagering in the state requires proper licensing and is limited to individuals aged 21 or older.
The DCP considers contracts based on athletic outcomes to be classified as wagering if there is any element of risking value on the results, regardless of the terminology used by the platforms. In its communication, the department emphasized that such contracts may undermine youth protections and breach age restrictions, even if the firms were licensed.
Kalshi Seeks Court Protection Amid Enforcement
Kalshi responded to the DCP’s order by filing a lawsuit in Connecticut District Court on December 3. The company asked the court for an injunction to block enforcement of the cease-and-desist while the case proceeds. This legal move is designed to enable Kalshi to maintain operations for Connecticut users pending the court’s decision. Without this relief, Kalshi faces the possibility of having to suspend or limit access to sports market contracts in Connecticut.
At the time these letters were issued, only Kalshi had pursued litigation. Meanwhile, Robinhood and Crypto.com had not taken similar steps. They may still consider compliance, product adjustments, geofencing, negotiations, or eventual legal action.
Federal Law Versus State Gaming Regulations
Kalshi’s central argument is that the Commodity Exchange Act (CEA), a federal law, should supersede state gaming statutes in relation to event contracts traded on CFTC-regulated exchanges. The company claims that the Commodity Futures Trading Commission (CFTC) holds exclusive authority over these contracts. Therefore, Kalshi believes that states should not impose additional gambling regulations when exchanges already follow federal requirements.
In contrast, the DCP maintains that such contracts fall under sports wagering, as defined broadly under Connecticut law, and thus require compliance with state licensing and consumer protection measures.
Implications for Non-Sports Markets and Broader Impact
Kalshi contends that broad interpretations of Connecticut’s gambling statutes could impact not only sports markets but also election, economic, and other non-sports-based contracts. The company warns that this expansive regulatory approach could force platforms to restrict or halt all market access within the state, affecting a diverse range of contract offerings and leading to heightened compliance burdens.
Potential Outcomes and Industry Response
Should Kalshi obtain a preliminary injunction, it would be allowed to continue operations in Connecticut while the legal case is resolved. Such a development might encourage other platforms to challenge similar regulatory actions. If the injunction is denied, platforms would be required to remove or limit sports event contracts for Connecticut residents, a move that could prompt other states to follow with similar enforcement actions.
Another potential result could involve negotiated allowances, where non-sports event contracts remain accessible with strict compliance requirements, but sports-related markets continue to be prohibited without a state license. Legal observers suggest that Connecticut’s case is likely to influence regulatory decisions in other jurisdictions moving forward.
| Platform | Action Received | Legal Response |
|---|---|---|
| Kalshi | Cease-and-desist letter | Lawsuit filed; injunction sought |
| Robinhood | Cease-and-desist letter | No action taken at the time of writing |
| Crypto.com | Cease-and-desist letter | No action taken at the time of writing |
- Author
Daniel Williams
