Shares of Robinhood Markets Inc. traded higher in recent sessions, up 2.57% at $137.08 per share on Thursday, despite Connecticut regulators issuing a cease-and-desist order related to the company’s prediction market operations, according to market data.
summation
- Robinhood shares rose in early trading despite a halt order from Connecticut regulators.
- The Connecticut Department of Consumer Affairs cited Robinhood Derivatives, KalshiEX, and Crypto.com for offering contracts without proper licensing.
- Robinhood emphasized that it is a financial technology company and not a bank, noting that while customer deposits are held through FDIC-insured partner banks, the state ordered the platform to suspend contracts and allow residents to withdraw their funds.
The Connecticut Department of Consumer Affairs has issued orders to Robinhood Derivatives, KalshiEX LLC and Crypto.com, alleging that the platforms offered sports event contracts without proper licensing.
The state said the companies lack approval to operate sports betting services and emphasized that all forms of sports betting require a license under state law.
“Only licensed businesses can offer sports betting in Connecticut,” DCP Director Bryan T. Cafferelli said in a statement Wednesday. “None of these businesses are licensed to offer wagering in our state, and even if they were, their contacts violate numerous other state laws and policies, including offering wagering to individuals under 21 years of age.”
Robinhood Stock Profits
Robinhood’s valuation metrics have also risen as trading volume remains high, according to market data. Ark Invest recently added Robinhood stock to one of its exchange-traded funds, according to a disclosure from the company.
The company’s platform now offers trading in stocks, options, and major cryptocurrencies. According to company information, digital asset activity has contributed to overall platform usage as the company expands its services to provide access to both stock and cryptocurrency markets.
Connecticut regulators said the contracts offered by the platform did not comply with state law and were accessible to individuals under the legal betting age. Officials have raised concerns about the potential exposure of individuals on the state’s voluntary self-exclusion list, which prohibits the promotion of gambling to registered users.
It’s not just Connecticut
States including Nevada and New Jersey are trying to block online prediction markets, citing a loss of revenue for state-sanctioned gambling businesses such as casinos.
But companies like Kalshi have filed lawsuits to protect their rights to operate, arguing that their operations fall within federal laws governing derivatives on designated exchanges. A spokesperson noted that the company’s offerings are “very different from what state-regulated sportsbooks and casinos offer.”
The legal battle adds to a growing list of challenges for prediction market providers, including opposition from Native American tribes protecting tribal gaming interests. Despite regulatory chaos, business continues to thrive. Kalshi recently raised $1 billion at a valuation of $11 billion, just weeks after valuing the company at $5 billion in a separate round.
In a separate statement, Robinhood described itself as a financial technology company rather than a banking institution, noting that banking services are provided through partner banks that maintain membership in the Federal Deposit Insurance Corporation. The company released a clarification explaining how customer deposits are processed through its partner bank agreements.