Prediction market platforms 'red light'… U.S. Connecticut issues cease-and-desist orders to Kalshi, Robinhood and others

The U.S. state of Connecticut has issued orders to cease operations to some decentralized prediction market platform operators.

The Connecticut Department of Consumer Protection (DCP) said on the 3rd (local time) that it "sent letters to three platforms — Kalshi, Robinhood, and Crypto.com — issuing orders to stop and cease (prediction market platforms)." Bryan Cafferelli, a commissioner at the Connecticut Department of Consumer Protection, said, "None of the three companies held a license to offer betting contracts in Connecticut," and "even if they had obtained a license, they would be violating several state laws and policies, such as offering betting services to those under 21."

Notably, Connecticut has classified prediction market platforms as "unlicensed sports betting businesses." Connecticut said, "Prediction market platforms that offer 'Sports Events Contract' are illegal," and pointed out that "such platforms have no obligation to comply with Connecticut's technical standards for gambling platforms, so consumers' financial and personal information could become vulnerable." It added, "The house rules that govern the settlement of all bets within (prediction market platforms) have not been reviewed by any regulatory agency," and "bets offered on such platforms are unregulated and may not pay out winnings as advertised."

Some of the platforms ordered to cease operations by Connecticut plan to take legal action. Kalshi told U.S. crypto-focused outlet Cointelegraph that "Kalshi is a regulated exchange and is subject to exclusive federal jurisdiction under federal law," and that "it has already filed a lawsuit in federal court." Robinhood also said, "Robinhood's (sports) event contracts are regulated at the federal level by the U.S. Commodity Futures Trading Commission (CFTC)," and added, "retail customers can access prediction markets in a safe and compliant manner."

Meanwhile, the prediction market platform market has recently shown steep growth. That is why Kalshi was valued at $11 billion (about 16.2 trillion won) in its recent Series E funding. According to Token Terminal, the trading volume of prediction market platforms was about $8.3 billion as of last month, nearly a 113% increase from about $3.9 billion a year earlier.