Connecticut's Department of Consumer Protection (DCP) sent cease-and-desist orders to nine prediction market platforms on September 9, 2026, saying their sports event contracts amount to unlicensed sports betting under state law.
A week later, on September 16, Underdog sued Attorney General William Tong and the DCP in federal court, asking it to block the state from enforcing its gambling laws against Underdog's prediction markets.
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Connecticut Takes Action Against Prediction Markets
Connecticut is one of more than a dozen states cracking down on prediction trading. The state recently issued cease-and-desist letters to nine different companies, including Underdog. Here are the operators now under pressure to discontinue in Connecticut:
- Underdog Predict
- Polymarket
- Coinbase
- Crypto.com
- Robinhood
- ProphetX
- Novig
- Webull
- Gemini
The orders require the platforms to stop offering, advertising and promoting sports event contracts to Connecticut residents, and to let those customers withdraw their funds. The state warned of civil penalties under the Connecticut Unfair Trade Practices Act and potential criminal charges.
Some of the companies have opened talks with the DCP since receiving the orders. Connecticut has also sent almost 30 subpoenas to payment providers, data providers, media outlets and app stores as part of the crackdown.
Underdog Responds by Filing a Lawsuit
Underdog reported nearly $600 million in prediction market volume from September 1 to 16. Its lawsuit asks for a declaration that Connecticut can't apply state gambling law to its event contracts, plus a permanent injunction against enforcement.
| Factor | Details |
| Date | Lawsuit filed on September 16th, 2026 |
| Court | U.S. District Court for the District of Connecticut |
| Underdog’s Position | Prediction markets are essentially sports betting |
| Connecticut’s Position | Contract events are completely legal and federally regulated |
In response to these crackdowns,
prediction market apps
like Underdog are filing lawsuits across the country. In fact, Connecticut previously targeted Kalshi, and a federal judge ruled in the state's favor. Kalshi has appealed this decision.
This lawsuit is also very important because, if Underdog wins, it would establish prediction markets as completely separate from sports betting. This would make it harder for states to shut down operations going forward.
An Evolving Legal Battlefield
Many other operators and states are clashing over whether prediction trading is legal under CFTC regulations and guidelines. States are suing to challenge the federal government’s authority and enforce their own gambling and sports-betting laws.
Operators aren't backing down. Kalshi has challenged state regulators in Nevada, New Jersey, Maryland, Utah, Tennessee and Ohio. The CFTC sued Connecticut in April over its treatment of event contracts, and Robinhood has moved to join that case.
Are Prediction Markets Breaking the Law?
There’s an ongoing debate about whether sports
prediction sites
are the same as sports betting sites. Proponents of prediction trading claim that contract events are financial derivatives regulated by the Commodity Futures Trading Commission under federal guidelines.
Connecticut views a contract on a game's outcome as the same as a moneyline, spread, or total bet. As DCP Commissioner Bryan Cafferelli put it, "sports betting may only be offered by legal, licensed sportsbooks."
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