Connecticut Cracks Down on Robinhood, Kalshi, and Crypto.com: Regulatory Storm Hits Major Platforms

Connecticut just dropped the hammer on three financial heavyweights—and crypto's favorite retail playground took a direct hit.

The state's banking commissioner unleashed a triple-threat enforcement blitz against Robinhood Crypto, prediction market platform Kalshi, and Crypto.com. Official filings cite violations of state securities laws, with cease-and-desist orders landing like subpoenas at a Wall Street holiday party.

Robinhood's Crypto Arm in the Crosshairs

Connecticut alleges Robinhood Crypto operated as an unregistered broker-dealer—a classic regulatory jab at the platform that brought zero-commission trading to the masses. The state claims the company failed to properly register its crypto brokerage services, leaving investors without mandated protections.

Kalshi's Prediction Markets Get Predicted

The regulatory sweep didn't stop at traditional finance frontiers. Kalshi, the platform letting users bet on everything from election outcomes to Fed rate decisions, caught its own compliance citation. Connecticut claims the company's event contracts constitute unregistered securities—a ruling that could ripple through the entire prediction market ecosystem.

Crypto.com's Compliance Gap

Even established crypto exchanges aren't immune. Crypto.com, which aggressively expanded during the last bull run with stadium naming rights and celebrity endorsements, now faces allegations of operating without proper state registration. The platform's Connecticut users might be wondering if those Super Bowl ads came with fine print the size of a blockchain ledger.

The timing couldn't be more symbolic—just as markets flirt with new highs, regulators remind everyone they're still holding the rulebook. Connecticut's move signals that the 'come one, come all' era of crypto platforms might be closing, replaced by the less exciting but more permanent 'comply first, innovate second' paradigm. Because nothing says 'financial revolution' like a properly filed Form BD.

Unregulated risks for consumers

The DCP cited numerous concerns related to the operations of these platforms. They do not adhere to Connecticut’s technical wagering minimum standards, placing personal and financial information at risk. In addition, these platforms do not provide integrity controls, creating the possibility that outcomes may be manipulated by insiders. Regulators require licensees to monitor for suspicious activity and prohibit insiders from betting, but unlicensed wagering services evade such protections.

Moreover, all the house rules about the settlement of wagers are not checked or verified, and there are no ways for users to get their money back in case of failure. Platforms also offer bets on events with known outcomes, such as award shows and professional team trades, which create conditions for unfair insider advantages.

Connecticut law strictly prohibits wagers on events where outcomes are already known. Furthermore, advertising to individuals on the Voluntary Self-Exclusion List or college campuses violates state rules, as does offering bets to underage users.

Expanding legal pressure across states

Connecticut’s directives reflect wider legal attention on the provider in the U.S. this year. In New York, Kalshi is facing a class-action lawsuit over illegal sports betting in the FORM of its “event contracts.” According to the plaintiffs, the platform violates state laws by rebranding wagers as financial instruments in a way that harms users across the country. 

The case shows how contracts on Kalshi’s exchange are designed to function just like classic sports betting products-moneyline, point spread, over/under-while lacking state licenses or consumer protections.

Robinhood Derivatives LLC also took a dig at gaming officials in Nevada and New Jersey after offering sports-related contracts without regulatory approval. The firm cautioned of possible civil and criminal penalties because of noncompliance.

Meanwhile, crypto prediction platform Polymarket has re-launched its US app, offering sports prediction markets first, with expansion to politics, crypto, tech, and world events. The move is a signal of growing competition in the sector of prediction markets, which keeps attracting users and investors.

Connecticut’s MOVE shows that prediction markets can sometimes act like illegal gambling. People using these platforms risk losing money and don’t have protections if things go wrong. The legal actions also show that regulators across the U.S. are paying closer attention to these services. These steps aim to make sure platforms follow the rules and keep users safe.

Also Read: SEC Halts ProShares’ 3× Bitcoin, Ether, Solana, XRP Funds