CFTC, Robinhood Move to Block Connecticut Crackdown on Prediction Markets
The federal regulator wants a judge to halt Connecticut's enforcement push against prediction-market platforms, as Robinhood joins the fight.
This article was produced with AI assistance and edited by the ON360 newsroom.
The Commodity Futures Trading Commission has asked a federal judge to stop Connecticut from enforcing its gambling laws against prediction-market platforms, escalating a fight that has drawn in Robinhood, Kalshi and Crypto.com. The CFTC filed a motion for a preliminary injunction on September 11 in the U.S. District Court for the District of Connecticut, according to Gambling Insider.
The federal filing came after Connecticut issued cease-and-desist orders against nine prediction-market platforms and nearly 30 subpoenas as part of an ongoing investigation. On the same day, Robinhood asked to intervene in the CFTC’s lawsuit against the state, saying its own cease-and-desist order gives it a direct stake in the outcome. Connecticut is not opposing that request.
Kalshi loss triggered the current standoff
The dispute traces back to August, when a federal judge denied Kalshi’s bid for a preliminary injunction and an injunction pending appeal. Connecticut then filed an enforcement lawsuit against the exchange. Coinbase has also sued the state, though that case has been stayed.
The core legal question is whether the federal Commodity Exchange Act pre-empts state gambling law when it comes to sports-linked event contracts. Courts across the country have split on the issue.
Supreme Court petitions pile up
Crypto.com has joined Robinhood in asking the U.S. Supreme Court to review a Ninth Circuit decision that let Nevada enforce its gambling laws against sports event contracts. The exchange’s parent, North American Derivatives Exchange, filed its petition on September 11, a week after Robinhood’s own filing.
The Ninth Circuit ruled on August 28 that the Commodity Exchange Act does not preempt Nevada’s authority over the contracts. Kalshi is separately seeking a full-court rehearing of that decision, while New Jersey has asked the Supreme Court to take up a Third Circuit ruling that went in Kalshi’s favour.
A related fight is unfolding in Wisconsin, where a federal judge cleared Kalshi and Robinhood to seek an immediate appeal of a ruling in the Ho-Chunk Nation’s challenge over sports contracts offered on tribal land. U.S. District Judge William Conley certified the question of whether federal commodities law overrides the tribe’s authority under the Indian Gaming Regulatory Act, and predicted the dispute would eventually reach the Supreme Court. The case is paused while the Seventh Circuit decides whether to hear it.
Kalshi settles pulled NFL contracts
Separately, Kalshi has told customers how it will settle its “Pro Football Week 1: Players to Compete” contracts after pulling the injury-related markets earlier this month following regulatory discussions. Winning positions will pay out as normal, while customers on the losing side will be reimbursed the cost of their positions.
The European Securities and Markets Authority, meanwhile, flagged prediction markets in its latest risk report, noting the products may fall under MiFID II, MiCA or national gambling rules and that the largest platforms generally lack EU market authorization. ESMA also questioned whether geographic blocks can stop users from reaching platforms through VPNs.
For Ontario operators watching the U.S. litigation, the outcome could shape how far commodities regulation can reach into products that resemble sports betting. Regulated Canadian sportsbooks continue to operate under provincial oversight, with tools such as deposit limits and self-exclusion required for players who want them.
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