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Read Full BioPrediction market platform Kalshi has filed a lawsuit against Connecticut authorities after the state issued the company a cease-and-desist letter.
Connecticut became the ninth state to issue a cease-and-desist order to Kalshi, while also sending the same order to Crypto.com and Robinhood, which host Kalshi’s markets.
The Department of Consumer Protection (DCP) published a press release stating that it has ordered the companies to cease operations in Connecticut, as it views prediction markets as unlicensed gambling.
Prediction Markets Flaunt Several State Gambling Laws
The letter also notes that even if the platforms held valid gambling licenses, the contracts still violate state laws as they allow individuals under the age of 21 to place bets and allow wagers on Connecticut college sports teams.
In addition, the DCP stated that prediction markets are available to individuals who have self-excluded from gambling, house rules are not reviewed by a regulator, and the platforms permit insider trading.
Polymarket has not been issued a cease-and-desist order. Still, the company’s CEO, Shayne Coplan, hinted that he allows insider trading on markets as a way to enhance their predictive value further.
DCP Commissioner Bryan T. Cafferelli commented, “Only licensed entities may offer sports wagering in the state of Connecticut. None of these entities possess a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”
The DCP ordered the three platforms to immediately cease advertising, offering, promoting, or otherwise making available “sports event contracts” or any other form of unlicensed online gambling to Connecticut residents.
The DCP also ordered all three companies to allow Connecticut residents to withdraw any funds currently held by the platforms. The agency added that failure to comply with the order may result in civil or criminal penalties.
Kalshi Responds With Lawsuit
As the company has done in multiple states, Kalshi responded by filing a lawsuit against the DCP. The lawsuit states, “Connecticut’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges.”
It goes on to make the same arguments as it has done in lawsuits filed in Nevada, New Jersey, Maryland, Ohio, and New York. To date, no state has successfully forced Kalshi to cease operations.
Nevada has been the most successful so far at halting prediction markets. Crypto.com and Robinhood withdrew from the state, while FanDuel and DraftKings preemptively withdrew their gambling licenses before launching their own prediction market platforms.
Kalshi Perseveres Despite Growing Legal Challenges
Kalshi, however, refuses to back down despite a judge withdrawing a previously granted injunction that allowed it to continue operating. It awaits a definitive ruling from the courts on whether it will have to halt operations in Nevada.
An adverse ruling in one state could be a catalyst. In its lawsuit against Connecticut, Kalshi cites the injunction that New Jersey granted the platform. Notably, it does not mention that the judge in Nevada decided to reverse the injunction or that a judge in Maryland refused to grant an injunction.
In addition to its legal battles with state gambling regulators, Kalshi faces a new lawsuit in New York that alleges the platform operates as a sportsbook, taking bets against the house. Kalshi rejects this claim, with co-founder Luana Lopes Lara dismissing the lawsuit as a smear campaign.
In total, the company is involved in 18 different court cases. It says it will continue to fight any action, arguing that the platform is fair and legal. A spokesperson stated, “Prediction markets are a critical innovation of the 21st century, and like all innovations, they are initially misunderstood. We are proud to be the company that has pioneered this technology and stand ready to defend it in a court of law.”
