Connecticut took action in the nationwide battle between states and prediction markets, sending cease-and-desist orders to nine platforms on Thursday.
Gov. Ned Lamont (D) announced that the Connecticut Department of Consumer Protection (DCP) had sent the notices, along with 30 subpoenas, to minimize the danger posed by “illegal” prediction platforms. This comes less than a month after Connecticut sued prediction industry leader Kalshi for offering sports event contracts that it argued violated state gaming laws.
Connecticut targets prediction markets
Prediction markets only needed one year to vault from a developing industry to a mainstay for national audiences. Operators allow customers to buy and sell “Yes” and “No” outcomes associated with different events in politics, weather, entertainment, pop culture, finance, and most controversially, sports.
The nine platforms that received the cease-and-desist orders are:
- Polymarket
- Coinbase
- crypto.com
- Robinhood
- ProphetX
- Novig
- Webull
- Gemini
- Underdog Predict
Connecticut entered the prediction market debate last Dec., when its DCP sent cease-and-desist orders to Kalshi and other platforms offering unlicensed sports event contracts. Its latest action strengthens its opposition against the industry, which is already generating over $50 billion in monthly trading volume across all American platforms.
“Connecticut has been at the forefront of this issue, leading the way in protecting consumers — including young people, student athletes, and those suffering from gambling addiction — from unregulated gambling markets, which put your money and information at risk,” Lamont wrote in a statement.
Prediction platforms operate under the eye of the Commodity Futures Trading Commission (CFTC) and do not follow state gaming regulations. The CFTC has supported operators at nearly every turn, including in legal disputes with state officials.
Despite that, Lamont argued that prediction markets mislead consumers by describing themselves as legal and safe financial tools for customers in Connecticut and across the country.
“We're putting ourselves at risk. We're putting our kids at risk,” Lamont said. “I've got to make sure that the prediction markets don't play games with us as well.”
Fighting against “illegal gambling”
Connecticut is one of 39 states that offer legal sports betting in some capacity. 31 of the states and Washington D.C. allow users to place bets online and through mobile apps.
The DCP is in charge of regulating licensed platforms. All unlicensed operators are considered noncompliant with the state’s gaming bylaws and are therefore illegal.
“Our laws are clear: sports betting may only be offered by legal, licensed sportsbooks that adhere to our regulations and technical standards,” DCP Commissioner Bryan T. Cafferelli said.
Prediction markets are set to experience their busiest time of the year over the coming months.
The American Gaming Association estimated that $40 billion would be traded in NFL prediction markets before the end of the season. That doesn’t include other major events such as college football, the return of the NBA, the MLB playoffs, or the midterm elections.
The growing interest in prediction markets has also prompted further scrutiny of the integrity of games, which Lamont believes are coming under an increasing threat.
“Look, you really want our athletes betting on their own sports? Does that really make sense?” Lamont said. “You could do that over the prediction markets, not in our way, not going to allow it here in the state of Connecticut.”
The Trade Handle Prediction Markets Take
As much as states and platforms quibble over their legal rights to operate and regulate their respective entities, there is a clear lack of a national precedent. Connecticut has taken a proactive stance in fighting against prediction markets, but the industry as a whale will likely need to be decided by the U.S. Supreme Court. New Jersey Attorney General Jennifer Davenport recently made an appeal for that to happen, and with the momentum of the prediction industry, that feels like an unavoidable outcome.