State Orders Robinhood and Crypto.com to Halt Operations

Connecticut has become the latest state to challenge the legality of prediction markets, issuing cease-and-desist orders to Kalshi, Robinhood, and Crypto.com. The move by the state’s Department of Consumer Protection marks a significant escalation in a nationwide dispute over whether these platforms constitute illegal gambling.

This action makes Connecticut the tenth state to take a formal stand against prediction markets, joining a growing chorus of regulators and tribal groups demanding stricter oversight. The core of the conflict revolves around a fundamental question: are event contracts, which allow users to bet on real-world outcomes, legitimate financial instruments or simply wagers?

The Heart of the Dispute: Wagers or Financial Tools?

Prediction market platforms like Kalshi and Polymarket frame their services as a form of price discovery, arguing they offer a unique way to aggregate public opinion on future events. However, state gambling authorities see it differently. They contend that in practice, these event contracts are functionally indistinguishable from bets placed at a traditional sportsbook.

While questions about the legality of event contract trading have long followed the industry, tensions erupted this year. The Ohio Casino Control Commission was the first to act in April, and since then, regulators in Illinois, Maryland, New Jersey, Arizona, Montana, Nevada, Massachusetts, and New York have joined the fight.

Crypto Platforms Drawn into the Fray

The conflict has also drawn in Native American tribes, which hold special rights to operate gambling under federal law. Kalshi has faced tribal lawsuits in California and Wisconsin and has responded by filing its own complaints in federal court to block state-level injunctions.

The regulatory battleground expanded significantly when mainstream crypto platforms entered the market. Crypto.com began offering event contracts in late 2023, followed by Robinhood a few months later, with both companies partnering with Kalshi. This brought a much larger user base to a once-niche sector, attracting further regulatory scrutiny.

As the crackdown has intensified, Robinhood and Crypto.com have found themselves directly in the crosshairs. In addition to the orders from Connecticut, gambling commissions in Arizona, Maryland, Ohio, and Illinois have also targeted the crypto exchanges alongside Kalshi, signaling a broader and more coordinated regulatory push against the industry.