Connecticut Gov. Ned Lamont is making a legislative effort to shield younger residents from prediction markets.
Lamont has introduced House Bill 5038, a piece of legislation that would raise the minimum age requirement for event contract trading from 18 to 21. The legislation also proposes new advertising rules for prediction markets amid the growing popularity of event contracts, particularly sports, nationwide.
HB 5038 was immediately referred to Connecticut’s Joint Committee on General Law, which held a hearing on the bill with plans to further discuss the potential age increase.
Lamont’s bill excludes sports from prediction markets definition
HB 5038 defines prediction markets as “any system that allows consumers to open a speculative position on the outcome of future events, in a bid-ask format, regardless of the mechanisms or structures used for opening speculative positions on future events.”
The text of the bill specifically notes that the definition of prediction markets does not include sports wagering, online casino gaming or internet gaming, as those terms are defined by state law.
The bill would also mandate that prediction markets must implement systems that verify a customer’s age and whether they are physically located in Connecticut. It also requires prediction markets to close an account if they have permitted trading by someone under the age of 21 and “close all positions on that account.” A prediction market that allows trading by someone under 21 would have to close and return all funds in the impermissible account.
Potential new advertising rules in Connecticut
HB 5038 also provides a framework for prediction market advertising. It would require prediction markets to provide visible messaging that consumers must be 21 or older to engage with their platforms. It also seeks to prevent prediction markets from publishing any advertisement “aimed exclusively or primarily at consumers under twenty-one years of age or at college campuses.”
Lamont’s piece of legislation also prohibits advertisements that leverage images or symbols that contain “celebrity or entertainer endorsements.”
A prediction market that violates the age and advertising rules is subject to a civil penalty that can reach up to $10,000 for each violation. The state’s Attorney General is responsible for levying the penalties against prediction markets that fail to adhere to the standards. If the AG determines that a prediction market has “engaged in a persistent course of conduct” that violates HB 5038, it is subject to a civil penalty of up to $50,000 for each violation.
The bill states that the Department of Consumer Protection (DCP) would help to enforce HB 5038’s rules.
Tribes worried bill gives prediction markets legitimacy
Lamont’s measure is receiving opposition from the Mashantucket Pequot Tribal Nation and the Mohegan Tribe, two federally recognized tribes in Connecticut that have the exclusive rights, along with the state lottery, to online gaming in the Constitution State.
“By regulating an activity that is illegal, Connecticut creates confusion and gives the false impression that prediction markets are permissible,” said the two tribes in a joint statement. “Prediction markets would introduce an unregulated, untaxed gaming product in Connecticut that runs counter to our state’s established standards for consumer protection, integrity and oversight, and longstanding tribal-state partnership in gaming.”
Lamont responded to the tribes by iterating that his measure does not legalize event contracts, as they are under federal regulation by the Commodity Futures Trading Commission (CFTC), but provides safeguards for the products amid their popularity.
“We appreciate the concerns raised by the Mashantucket Pequot Tribal Nation and the Mohegan Tribe, and recognize the importance of Connecticut’s longstanding tribal-state gaming partnership. [House Bill] 5038 is intended as a narrow consumer-protection measure. It does not authorize, license or legalize prediction markets. Rather, it establishes age and advertising guardrails focused on preventing access by minors,” said a spokesperson for Lamont.
Connecticut regulator sends shutdown orders
Last April, the DCP opened an investigation into Kalshi over potential unlawful activity for its delivery of sports event contracts. Eight months later, the department sent cease-and-desist letters to Kalshi, Robinhood and Crypto.com for offering sports event contracts that allegedly violate state law.
Kalshi immediately responded to its cease-and-desist order by filing a lawsuit against the regulator in Connecticut District Court and requesting an injunction to allow it to continue operating in the state. Kalshi argues that the Commodity Exchange Act preempts state gaming law and provides the CFTC with the authority to regulate prediction markets.
Kalshi was cleared to continue offering sports event contracts in Connecticut after District Court Judge Vernon Oliver ordered the DCP not take any sort of enforcement action against Kalshi until the court has considered the request for an injunction.
Kalshi was present for the latest HB 5038 hearing, standing in opposition.
