Connecticut Intensifies Crypto Regulation with New Restrictions
Connecticut's Crackdown on Crypto Platforms
Connecticut has ordered Kalshi, Robinhood, and Crypto.com to immediately stop offering event-based contracts, escalating its regulatory approach against cryptocurrencies.
This move underscores a significant regulatory conflict between state gambling laws and federal derivatives regulations.
A Focus on Unlicensed Operations
The Department of Consumer Protection (DCP) has issued cease-and-desist orders, claiming these platforms conduct unlicensed online sports betting via event-based prediction contracts. This action follows Governor Ned Lamont's recent legislation banning state-level Bitcoin investments, positioning Connecticut as one of the least crypto-friendly states in the US.
States such as Texas and Arizona are exploring more favorable digital asset frameworks, contrasting sharply with Connecticut's tightening restrictions.
State vs. Federal Regulatory Conflict
The DCP's press release highlighted that none of the platforms hold a license to offer wagers in the state and accused them of violating several state laws, including marketing to underage individuals.
- Advertising to those on self-exclusion lists
- Lacking integrity controls
- Allowing bets on events with known outcomes
- Operating outside consumer protection frameworks
- Misleading users about the legality of investments
DCP Gaming Director Kris Gilman emphasized, "A prediction market wager is not an investment." The platforms are urged to halt operations and facilitate fund withdrawals for Connecticut residents.
While Robinhood and Kalshi argue federal oversight, Kalshi has initiated a federal lawsuit challenging Connecticut's authority, highlighting the growing legal divide between state and federal oversight.
Broader Implications for Crypto Markets
Connecticut's actions contribute to a broader, multi-state regulatory wave. New York and Nevada are engaged in similar legal disputes, with Nevada recently affirming state control over sports-based event contracts. Meanwhile, Polymarket's CFTC approval highlights an alternative regulatory path, contrasting with Connecticut's restrictive measures.
This regulatory landscape creates uncertainty for prediction markets, potentially shaping their future as either federally supervised financial products or state-regulated gambling. The outcome of Kalshi's federal challenge could influence whether more states adopt Connecticut's approach or align with the CFTC model.