Connecticut has sent cease-and-desist letters to nine prediction markets, accusing them of operating illegal sports betting operations. It comes just two weeks after the state sued Kalshi, the largest prediction market operator.
Prediction markets allow users to trade on nearly anything: the outcome of sports games, elections and even military action.
Users purchase contracts priced between one and 99 cents, depending on how likely the event is to occur.
For example, a current question on Kalshi’s homepage asks “Will Congressional salaries increase?” Buying a "no” contract for 93 cents means the user will receive $1 — seven cents more than they initially traded — if they are correct.
The nine sites CT is going after are Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, Gemini and the Underdog Predict.
Governor Ned Lamont said Connecticut lawmakers were intentional in how it legalized sports betting in 2021, and sports betting through prediction markets not regulated by the state undermines that.
“We're putting ourselves at risk. We're putting our kids at risk,” Lamont said. “We've rolled out sports betting. We've done it in a very thoughtful way, protecting our young people, protecting those problem gamblers out there. And I got to make sure that the prediction markets don't play games with us as well.”
Prediction markets are currently regulated by the Commodity Futures Trading Commission. Last month, a federal judge ruled that the sports event contracts offered by the sites are illegal gambling and not protected by federal law.
State Consumer Protection Commissioner Bryan Cafferelli said one of the sites has already committed to complying with the cease-and-desist.
“We are hopeful these actions will curb illegal prediction market activity in our state, especially as the betting season ramps up with the start of the NFL season this week,” Cafferelli said.
Connecticut allows sports betting through three organizations: two from indigenous nations and one through the state. They are DraftKings (Foxwoods), FanDuel (Mohegan Sun), and Fanatics (Connecticut Lottery).
The state has also subpoenaed nine licensees and 15 media organizations that “may have information pertinent to the state’s investigation.”
They include PayPal, LexisNexis, Heart Connecticut Media, and NBC Connecticut.
