Louisiana Latest to Issue Warning

Louisiana is the latest to issue a warning to its licensed sports betting operators.

Do not partner with anyone to offer prediction market contracts, namely sports event contracts, in the state of Louisiana.

Louisiana Gaming Control Board Chair Christopher Hebert issued a letter to licensed Louisiana sports betting operators last week who may be exploring the markets or partnering with those who offer them, noting it may negatively affect sports betting licensure in the future.

Illegal Sports Gambling

According to iGB, which acquired a copy of the letter sent to licensed sports betting operators, the Louisiana Gaming Control Board views event-style contracts as illegal gambling in the state.

“No person or entity may offer, accept, facilitate or in any way enable sports wagering in Louisiana unless the activity is conducted by a licensed or permitted operator through an approved sports wagering platform and exclusively on events included in the board’s Sports Wagering Catalogue,” the letter reads. “Any event-style ‘contract’, ‘swap’, ‘market’ or other ‘financial instrument’ that allows individuals to stake value on the outcome of a sporting event, other than a board-licensed or permitted sports wagering operators, constitutes illegal gambling.”

Hebert warns licensed Louisiana sports betting operators that any direct or indirect involvement with sports event contracts may affect “a regulated party’s suitability of licensure or permitting in Louisiana.”

Louisiana is the latest state to warn operators who may be exploring sports event contracts. One of its licensed operators, Fanatics Sportsbook, launched its own predictions market service just last week.

Fanatics Markets launched prediction market contracts – including sports event contracts – across 24 states.

Connecticut’s Cease-and-Desist Actions

The Connecticut Department of Consumer Protection Gaming Division last week issued cease-and-desist notices to Kalshi, Robinhood, and Crypto.com for their sports event and prediction market offerings.

The letters were sent to KalshiEX LLC, Robinhood Derivatives, LLC, and Crypto.com, ordering an immediate cessation of all advertising and offering of sports event contracts to Connecticut residents.

“Only licensed entities may offer sports wagering in the state of Connecticut,” said Department of Consumer Protection (DCP) Gaming Division Commissioner Bryan T. Cafferelli in a release. “None of these entities possess a license to offer wagering in our state, and even if they did, their contracts violate numerous other state laws and policies, including offering wagers to individuals under the age of 21.”

One day after receiving a cease-and-desist in the state, Kalshi levied a lawsuit in U.S. District Court against the Connecticut Department of Consumer Protection and its director, Kristofer Gilman, requesting a preliminary and permanent injunction against the state.

“The Connecticut Department of Consumer Protection seeks to prevent Plaintiff KalshiEX LLC (“Kalshi”) from offering event contracts for trading on its federally regulated exchange. It does so by threatening Kalshi with imminent criminal and civil penalties for offering these contracts. Connecticut’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges,” counsel for Kalshi wrote in the lawsuit.

The lawsuit claims the Connecticut Department of Consumer Protection seeks to prohibit Kalshi from offering sports event contracts within the state, despite federal laws permitting the contracts and Kalshi being a federally-designated derivatives exchange.

Broader Regulatory Battle Over Prediction Markets

Kalshi’s lawsuit against the Connecticut Department of Consumer Protection – and all of its lawsuits against state gaming commissions – revolves around the central question of who regulates sports event contracts, and prediction markets, in general.

Companies such as Robinhood, Kalshi, and Crypto.com believe that state regulatory bodies do not have the right to intrude on the government’s “exclusive” authority to regulate prediction market, filing lawsuits in New Jersey, Nevada, and Maryland to defend its practices. These companies believe the CFTC is the only regulatory body that can legally block contracts from being offered to customers.