Robinhood Markets shares rose in recent trading, closing 2.57% higher at $137.08 per share on Thursday, despite a cease-and-desist order from Connecticut state regulators related to the company's predictive market operations, according to market data.
summary
- Robinhood shares rose in early trading despite a cease-and-desist order from Connecticut regulators.
- The Connecticut Department of Consumer Protection cited Robinhood Derivatives, KalshiEX, and Crypto.com for offering contracts without proper licensing.
- Robinhood emphasized that it is a financial technology company, not a bank, and noted that while customer deposits are held through partner banks covered by the FDIC, states have ordered the platform to suspend contracts and allow residents to withdraw funds.
The Connecticut Department of Consumer Protection issued orders against Robinhood Derivatives, CalciEX LLC, and Crypto.com, alleging that the platforms offered contracts for sporting events without proper licensing, according to a letter from the agency.
The state said these companies lack licenses to operate sports betting services, stressing that any form of sports betting requires a license under state law.
“Only licensed entities may offer sports betting in the state of Connecticut,” DCP Commissioner Brian T. Cafferelli said in a statement Wednesday. “None of these entities have a license to offer gambling in our state, and even if they did, their associates violate numerous other state laws and policies, including offering betting to individuals under 21 years of age.”
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Robinhood stock rises
Robinhood's valuation metrics rose as trading volumes remained high, according to market data. Ark Investments recently added Robinhood stock to one of its exchange-traded funds, according to company disclosures.
The company's platform currently offers trading in stocks, options, and major cryptocurrencies. According to company information, digital asset activity is contributing to overall platform usage as the company expands its services offering access to both stock and cryptocurrency markets.
Connecticut regulators said the contracts offered by the platform do not comply with state law and could be accessed by individuals under legal gaming age. Officials expressed concern about the potential for infection of individuals on the state's self-regulatory list, which prohibits the promotion of gambling to registered users.
It's not just Connecticut.
States like Nevada and New Jersey are trying to block online prediction markets, citing lost revenue for casinos and other state-licensed gaming entities.
But companies like Calci have filed lawsuits to protect their rights to operate, arguing that their operations fall under federal laws governing derivatives trading on designated exchanges, and a spokesperson said the company is “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 that protect their tribes' gaming interests. Despite regulatory confusion, business continues to thrive. Kalsi recently raised $1 billion at an $11 billion valuation, just weeks after another round valued the company at $5 billion.
In a separate statement, Robinhood described itself as a financial technology company, not a banking institution, and noted that banking services are provided through affiliated banks that maintain membership in the Federal Deposit Insurance Corporation. The company issued a statement explaining how customer deposits are handled through partner banking arrangements.
read more: Connecticut attacks Calci, Robinhood, Crypto.com over sporting event contracts
