The U.S. state of Connecticut has launched a regulatory fight against prediction markets, immediately issuing cease and desist orders to financial platforms Robinhood (HOOD), Crypto.com, and Kalshi. The state’s Department of Consumer Protection (DCP) claims these platforms are offering unlicensed online gambling through their “event contracts,” which the state views as illegal sports wagering.
TipRanks Cyber Monday Sale
- Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
DCP Commissioner Bryan Cafferelli stated that none of these companies have a license to offer wagering in Connecticut. He stressed that even if they did, their contracts break several state laws, including allowing bets by people under the age of 21. The order requires all three platforms to immediately stop offering these contracts to residents in Connecticut.
‘Gambling vs. Financial Trading’ Is The Legal Fight
The central problem is a legal disagreement over what these event contracts actually are. The state views a contract based on a sports outcome as sports wagering that must be regulated locally. It claims the platforms offer no consumer protection for the money or information people use.
In contrast, Robinhood and Kalshi argue their contracts are federally regulated financial derivatives. They insist that the Commodity Futures Trading Commission (CFTC) oversees their markets, which should keep them free from state gambling laws.
Kalshi Sues The State Immediately
Kalshi, the platform specializing in these event contracts, fought back immediately by filing a lawsuit in federal court on Wednesday. The company argues that Connecticut is interfering with the federal government’s role, stating that the CFTC has “exclusive jurisdiction” over its platform.
Kalshi is facing similar legal fights in at least 10 US states, including New York and Massachusetts. The high stakes are underlined by the fact that Kalshi recently announced closing a large $1 billion funding round at an $11 billion valuation, showing major investment is still flowing into this legally challenged sector.
Crypto.com Pushes Ahead Despite Orders
Despite receiving a cease and desist order, Crypto.com is moving forward with its plans. On the same day the Connecticut order was issued, the platform announced the launch of Fanatics Markets, a new prediction platform built through a partnership with the sports giant Fanatics. This launch in 10 states signals the company’s commitment to the prediction market space, despite the increasing number of state-level legal threats.
Key Takeaway
The legal fight in Connecticut escalates the national disagreement over prediction markets, directly challenging major firms like Robinhood and Crypto.com. The final result of Kalshi’s federal lawsuit against the state will set a major precedent. It will determine if event contracts are seen as federally protected financial trading or as illegal, unlicensed state gambling.
Is Robinhood a Good Stock to Buy?
Turning to TipRanks, analyst sentiment toward Robinhood (HOOD) is rated as a Moderate Buy, based on the consensus of 21 analysts tracked in the last three months. Of these ratings, 14 analysts call it a Buy, six recommend a Hold, and one recommends a Sell.
The average 12-month HOOD price target sits at $151.63. This target implies an upside potential of 13.46% from the last price.
