Connecticut Escalates Crackdown on Sports Prediction Markets
Connecticut is intensifying its efforts to regulate prediction markets, arguing that sports-related event contracts offered by online platforms are essentially wagers and should be subject to the state's gambling laws.
The Connecticut Department of Consumer Protection (DCP) has issued cease-and-desist orders to nine companies: Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, Gemini and Underdog Predict. State regulators want the companies to stop offering, promoting or advertising sports event contracts to Connecticut residents.
The action adds to an expanding legal dispute over how prediction markets should be classified in the United States. Operators generally describe their products as financial contracts that allow users to trade based on future events. Connecticut officials, however, argue that when those contracts are tied to sports results, they operate much like conventional sports bets.
Connecticut challenges prediction market model
According to state regulators, the nine companies were offering sports-related prediction products without the licenses required for legal sports wagering in Connecticut.
The DCP has also instructed the companies to allow Connecticut customers to withdraw money held on their platforms. Failure to comply with the state's orders could result in additional civil or criminal enforcement.
Consumer Protection Commissioner Bryan T. Cafferelli has criticized the industry's use of financial terminology to describe these products. Connecticut officials say references to trading, investment strategy and market risk do not change the underlying activity when customers are financially exposed to the outcome of a sporting event.
The state has also raised consumer protection concerns, including safeguards involving minors and people who have previously excluded themselves from gambling.
Connecticut already maintains a regulated sports betting system. DraftKings operates through Foxwoods, FanDuel through Mohegan Sun and Fanatics through the Connecticut Lottery. State law also restricts betting on Connecticut collegiate teams.
Regulators therefore argue that prediction market companies should not be able to avoid those rules simply by presenting sports contracts as financial instruments.
Investigation reaches beyond operators
The state's investigation is also examining businesses that support the prediction market industry.
Nearly 30 subpoenas have been issued to companies and organizations that could possess information about how prediction platforms operate or reach Connecticut customers.
The list includes financial and payment companies such as PayPal, Plaid and Paysafecard, along with identity and compliance provider Socure. Sports-data companies Sportradar and Genius Sports have also been contacted.
Technology and distribution platforms have been included as well. Apple App Store, Google Play, Apple Pay, Google Wallet and Stripe received subpoenas.
Several media organizations, including ESPN, NBC Connecticut and Fox61/Tegna, were also among the recipients.
Connecticut has stressed that receiving a subpoena does not mean the organization is accused of wrongdoing. Instead, regulators are seeking information about the businesses, transactions, marketing and distribution methods connected to prediction markets.
The expanded investigation indicates that state officials are examining the wider infrastructure supporting these platforms, rather than focusing exclusively on the companies that create the event contracts.
Federal and state authorities disagree
Connecticut's position conflicts with the approach taken by the U.S. Commodity Futures Trading Commission (CFTC).
The federal agency has maintained that qualifying event contracts traded on federally regulated designated contract markets can fall under federal derivatives law. Such contracts can involve different types of future events, including economic, political, climate and sporting outcomes.
The disagreement has already resulted in litigation.
In April, the CFTC sued Connecticut, arguing that the state's efforts to prevent federally regulated exchanges from offering event contracts interfere with federal authority under the Commodity Exchange Act.
The federal-state conflict is not limited to Connecticut. The CFTC has also become involved in disputes with other states seeking to restrict prediction markets.
The central legal question is whether states can apply their gambling laws to event contracts offered through federally regulated financial markets.
Connecticut says sports contracts should be treated as gambling because customers are effectively risking money on the outcome of sporting events. Federal authorities and prediction market operators emphasize the structure and federal regulation of the contracts.
Kalshi becomes part of the dispute
Connecticut has also challenged Kalshi, another major prediction market company.
In August, Attorney General William Tong announced legal action against the platform, arguing that its sports event contracts constitute unlicensed sports betting.
Connecticut said a federal judge declined Kalshi's request for a preliminary injunction that would have temporarily prevented the state from enforcing its position. Kalshi later appealed the matter to the Second Circuit.
The case could become an important test of how state gambling regulations interact with federally regulated event markets.
A ruling favoring state regulators could give other states greater authority to restrict sports prediction contracts. A decision supporting federal jurisdiction could make it more difficult for individual states to impose separate restrictions on qualifying products.
Prediction markets continue to expand
The dispute comes as prediction markets gain greater attention across the United States.
These platforms occupy a unique position between financial trading and sports betting. Traditional sportsbooks operate under state gambling licenses and must meet requirements involving age verification, geolocation, responsible gaming and consumer funds.
Prediction market companies generally argue that their event contracts are financial products rather than traditional wagers. That distinction could allow them to operate under federal derivatives regulations rather than obtaining gambling licenses in every state.
However, state regulators are increasingly challenging that interpretation when contracts are linked directly to sporting events.
The CFTC is also developing its approach to the sector. The agency has sought public feedback on prediction markets and event contracts while considering how these products should be regulated.
Federal authorities have separately pursued cases involving allegations that individuals used non-public information to trade event contracts. Those actions highlight another issue for the industry: ensuring fair and transparent markets.
Potential impact on U.S. iGaming
Connecticut's actions could have consequences for the wider U.S. betting and iGaming industries.
If states succeed in classifying sports prediction contracts as gambling, operators could face licensing requirements and other state-level restrictions similar to those imposed on sportsbooks.
If federal regulators maintain stronger authority over qualifying event contracts, prediction markets could potentially expand across state borders under a federal framework.
A third possibility is the creation of a new regulatory category designed specifically for prediction markets, combining elements of financial-market supervision with gambling-related consumer protections.
The outcome could influence how companies design their products, market them to customers and handle payments.
Connecticut's decision to involve payment processors, technology providers, sports-data companies and media organizations also suggests that future enforcement could extend beyond prediction market operators themselves.
What comes next?
The legal battle over prediction markets is far from settled.
Connecticut's enforcement actions, the CFTC's federal lawsuit and the state's separate dispute with Kalshi could help determine whether sports event contracts are ultimately treated as financial instruments, gambling products or something entirely different.
For prediction market companies, the stakes are significant. A state-by-state gambling framework could make nationwide expansion more difficult, while a strong federal ruling could provide operators with greater regulatory certainty.
For sportsbooks and the broader iGaming sector, the outcome could determine whether prediction markets emerge as a major new competitor operating under a different set of rules.
At the center of the debate is a fundamental question: when does trading on an event become gambling?
Connecticut's latest crackdown shows that regulators believe the line has already been crossed when money is placed on sporting outcomes. Federal authorities and prediction market companies continue to argue that qualifying contracts belong within the financial markets.
The courts will ultimately have a major role in resolving that conflict, and their decisions could shape the future of prediction markets and sports betting regulation across the United States.
Source attribution: This article is based primarily on reporting by CT Insider and Connecticut state government materials, with additional context from the Connecticut Attorney General's Office and the U.S. Commodity Futures Trading Commission.
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Sources
CT Insider - "Connecticut issues cease-and-desist orders to nine prediction market companies," published September 10, 2026.
Office of Governor Ned Lamont / State of Connecticut - announcement concerning nine cease-and-desist orders and nearly 30 subpoenas related to prediction markets.
Connecticut Attorney General's Office - "Connecticut Sues Kalshi to Stop Illegal, Unlicensed Sports Betting," August 26, 2026.
U.S. Commodity Futures Trading Commission - complaint concerning Connecticut and federal jurisdiction over event contracts.
U.S. Commodity Futures Trading Commission - materials concerning prediction markets and event contracts.
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