State Pressure Forces First Real Pullbacks — Smaller Operators Exit Connecticut and Missouri
State enforcement is starting to produce concrete market exits rather than just litigation. Three operators — ProphetX, Gemini, and Webull — have withdrawn from Connecticut following cease-and-desist orders to nine companies. In Missouri, PrizePicks proactively suspended new Team Picks sports event contracts ahead of the October 18 compliance deadline, despite not receiving a cease-and-desist letter. The pullbacks reveal a split: smaller operators exit contested states to avoid legal risk, while Kalshi and Polymarket hold firm on the federal preemption argument.
State enforcement against prediction markets has entered a new phase: instead of producing only litigation, it is now producing actual market exits. In Connecticut, three operators — ProphetX, Gemini, and Webull — have withdrawn following cease-and-desist orders the Department of Consumer Protection issued to nine operators. The department says it remains in communication with those that have not withdrawn, including Polymarket, Coinbase, Crypto.com, Robinhood, Novig, and Underdog. In Missouri, PrizePicks notified customers it has suspended new Team Picks — its sports event-contract product — 'due to updated legal requirements for prediction markets in Missouri,' ahead of the October 18 compliance deadline from AG Catherine Hanaway's September 18 letters. PrizePicks was not among the six companies that received those letters; it suspended proactively.
For UK readers, this resembles the stage in a Gambling Commission enforcement sweep where smaller unlicensed operators quietly geoblock the market rather than contest a formal action, while the largest operators with the deepest legal resources dig in and litigate the underlying question. The split is defined by size and business model. The operators exiting — ProphetX, Gemini, Webull, PrizePicks — are either smaller prediction market specialists or larger firms for which sports event contracts are a secondary line. For them, the legal cost and reputational risk of fighting multiple state actions outweighs the revenue from sports contracts in any one state. PrizePicks is the clearest case: it suspended Team Picks in Missouri without even receiving a letter, while keeping its traditional fantasy product and its Culture Picks contracts live.
Kalshi and Polymarket are holding firm. The two leaders have built their entire strategy around the federal preemption argument — that CFTC registration lets them operate nationwide regardless of state gambling law — and withdrawing from contested states would undercut that position legally and commercially. For Kalshi, which generates most prediction market sports volume and is closing a $40 billion round, conceding any state would signal weakness in the argument underpinning its valuation. The two leaders continue to operate, continue to litigate, and wait for the Supreme Court. The result is a bifurcating market: in contested states the smaller operators leave while Kalshi and Polymarket remain, which paradoxically concentrates the two largest platforms' share in exactly the jurisdictions where enforcement is most aggressive.
The pullbacks matter for the legal narrative in a subtle way. The platforms argue their event contracts are legitimate federally-regulated instruments, not gambling. But when operators voluntarily suspend sports event contracts specifically — while keeping fantasy sports, culture contracts, and other products running — they implicitly concede that sports contracts are the legally problematic category, the one most resembling the sports betting states regulate. PrizePicks suspending Team Picks while keeping Culture Picks is a product-level acknowledgment that sports event contracts carry distinct legal risk. State attorneys general can cite these voluntary exits as evidence that even industry participants treat sports contracts as different from the economic and financial contracts with genuine hedging uses — a practical win for the enforcement campaign that complicates the platforms' all-contracts-are-equivalent framing, even as the two leaders resist.
Operators mentioned in this article
Recent updates
Google Adds Prediction Market Ad Policy — CFTC License Required, Ads Blocked in Five States
Google published a dedicated prediction markets section in its advertising policy on October 15, requiring domestic operators to hold a CFTC Designated Contract Market licence to run ads — favouring Kalshi and Polymarket US over unlicensed rivals. Google also bars prediction market ads targeting five states where enforcement is most active: Connecticut, Michigan, New York, Ohio, and Nevada. The policy makes Google's ad platform mirror the state enforcement map, using commercial access as a de facto regulatory layer.
Kalshi Partners With Signify to Police Athlete Harassment, Codifies Anti-Abuse Rule
Kalshi announced a partnership with Signify Group on October 15 to monitor social media for abuse and threats directed at athletes, coaches, and sports personnel across the NFL, NBA, MLB, NHL, and ATP Tour. Kalshi notified the CFTC of a new rule, dated October 13, codifying athlete harassment as an 'impermissible activity', with sanctions up to financial penalties and permanent account closure. The move follows a September appeal by five major leagues and their players' unions for lifetime bans on abusive bettors.
CFTC Moves to Classify Event Contracts as Swaps — Attempting to Settle the Core SCOTUS Question by Rule
The CFTC, led by Chairman Michael Selig, moved on October 9 to explicitly classify event contracts as swaps under the Commodity Exchange Act, placing prediction market contracts under federal swap regulation. The scope covers sports, political, cultural, and weather contracts, while a separate provision excludes casino-style gambling and sportsbook wagers. Selig said the aim is to remove 'any ambiguity.' The action targets the exact question dividing the federal circuits and now before the Supreme Court — whether event contracts are 'swaps.'