HARTFORD - State officials are taking action against prediction market companies, accusing them Thursday of allowing people to gamble on sports and other events illegally.
The state Department of Consumer Protection issued cease-and-desist orders to nine companies, claiming they are "illegally operating prediction markets in the state." Prediction markets have exploded in popularity over the last year, allowing users to buy and sell contracts that predict the outcome of an event. That event can range from the outcome of a sporting event to the result of an election.
There has been national debate in courts and legislatures over whether the trading should be allowed. While some of the companies have contended that their service is not gambling and have compared it to trading stocks or bonds, officials in Connecticut say its another form of sports betting.
"They have embarked on a coordinated campaign to convince people that they are offering investments by using such terms as trading, financial strategy, market risk, falsely implying that wagers are akin to traditional savings or investment vehicles," DCP Commissioner Bryan T. Cafferelli said at a press conference held at the Fanatics Sportsbook at the PeoplesBank Arena. "In reality they are indistinguishable from sports wagering, except they don't have consumer protections."
Both prediction markets and sports books allow for users to wager on outcomes. Whereas sports books have in-house experts who set odds, prediction markets have users swapping contracts of yes-or-no questions with profits or losses tied to the market. Winning a "yes" wager when the majority bought "no" contracts leads to a bigger payout. Those markets usually collect fees on contracts, while sports books are paid through losing bets. In Connecticut, taxes are collected on revenue of winning bets through sports books and betting on events like election outcomes is not allowed.
The nine companies issued cease-and-desist orders did not respond to a request for comment. Those companies are Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, Gemini and Underdog Predict.
Unlike sports betting, which is regulated by state government, Connecticut officials have opted not to regulate prediction markets. They are regulated federally by the Commodity Futures Trading Commission. Cafferelli noted that legal sports wagering in Connecticut is limited to Fanatics locations in cooperation with the Connecticut Lottery Corp., as well as DraftKings at Foxwoods Resort and Casino and FanDuel at the Mohegan Sun.
Cafferelli, who was joined by Gov. Ned Lamont, said the nine operators are in violation of multiple state laws including not having a license to operate as a sports betting company. He also claimed the companies allow underage gambling and send advertising to people on the 10,000-name list of those who have voluntarily opted out of betting on traditional platforms because of various degrees of gambling addiction. All of the companies state on their websites they are prediction market firms, meaning they would operate under different rules.
"These three platforms are subject to oversight from our agency," Cafferelli said. "They must adhere to regulations and standards that are designed to prevent harm to consumers and protect the integrity of the marketplace. Meanwhile dozens of illegal operators are preying on Connecticut consumers. Prediction markets in particular have branded themselves in such a way to make consumers think that they are a legal and safe place to bet on sports. They aren't adhering to our laws, our regulations or our technical standards."
Last December, the state filed a lawsuit against Kalshi, Robinhood Derivatives and Crypto.com in attempt to cease their operations in the state. A federal judge ruled last month in the state that sports event contracts are illegal and unlicensed, while not protected by federal commodities law.
Last month a panel of federal judges in San Francisco ruled that platforms such as Kalshi cannot be exempt from Nevada gambling regulations. Asked for comment on the governor's news conference Thursday, Kalshi Spokesperson Jacki McGavick was critical of Connecticut.
"You don't protect consumers by blocking exchanges that are actually regulated - you just push them offshore, into markets with no oversight or safeguards at all," McGavick said in a statement. "Call it whatever the governor wants: blocking a modern, federally supervised market isn't safety, it's anti-innovation. The safest option is the one he's fighting to keep out."
The state DCP also issued subpoenas to dozens of businesses, stressing they are not under investigation by the department. The subpoenas are part of the state's investigation into the operations of prediction markets as officials seek information. Those subpoenas included nine licensees: PayPal, LexisNexis, Plaid, Paysafecard, Integrity Compliance 360, SportRadar Solutions, Genius Sports Media, Genius Tech International and Socure Inc.
Fifteen subpoenas were issued individually to a variety of media companies: Hearst Connecticut Media Group, The Hartford Courant, Connecticut News Project, Norwich Bulletin, The Patch, The Day, ESPN, Fox61/Tegna Broadcast, NBC Connecticut, WFSB/Gray Media, WTNH/WCTX Nexstar Media, Audacy, Inc, Connoisseur Media, iHeartMedia, and Red Wolf Broadcasting.
Additionally, multiple app stores and non-licensed payment processing companies received subpoenas: Apple App Store, Google Play, Apple Pay, Google Wallet, Stripe.
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This article originally published at Connecticut issues cease-and-desist orders to nine prediction market companies.