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Gov. Ned Lamont’s State of the State address on Wednesday became a high-stakes event for more than just policymakers. On the prediction market Kalshi, traders wagered $150,000 on the specific vocabulary the governor would use during his speech.
Winning words: How “ICE” and “rebate” paid out
Lamont addressed several contentious topics, calling for US Immigration and Customs Enforcement to “go home” and proposing new restrictions on student smartphone use in schools. He also promised a small-business support package and a family rebate program offering up to $400 later this year.
For Kalshi traders, these policy points translated into “event contracts.” Those who bet Lamont would say “ICE,” “small business,” “phone,” or “rebate” saw payouts. However, wagers on “Trump,” “immigration,” or “mental health” failed when those exact terms were not used. Even the word “inflation” resulted in losses because Lamont opted for the variation “inflationary.”
How prediction markets set the odds
Prediction markets allow users to buy and sell contracts based on future occurrences. While often compared to gambling, these platforms are technically regulated at the federal level by the Commodity Futures Trading Commission (CFTC) as a new asset class.
Unlike traditional sports betting, the odds in these markets are determined by trade volume. If an outcome is perceived as unlikely, fewer people buy the contract, lowering its price. Traders can cash out their positions at any time before the event concludes.
The scale of these markets has grown significantly. Recently, one platform paid out $400,000 on the departure of Venezuelan President Nicolás Maduro following his capture by US forces.
Connecticut vs. Kalshi: The battle for oversight
Despite federal oversight, Connecticut officials are pushing for tighter state-level controls. On Thursday, Lamont proposed legislation to prohibit residents under 21 from using these platforms. The bill would require age verification and ban targeted advertising to minors.
Rob Blanchard, a spokesperson for the governor, said the state cannot wait for federal action to protect youth from “high-risk financial exposure.”
The proposal follows a December cease-and-desist order issued by the Department of Consumer Protection (DCP) against Kalshi, Crypto.com, and Robinhood Derivatives. The DCP accused the platforms of operating unlicensed sports gambling.
Kris Gilman, the DCP’s gaming director, warned that these platforms offer no consumer protections and argued that a prediction market wager is not a true investment.
Cease, desist, and sue: The courts decide
The state’s crackdown is currently stalled. A judge paused the cease-and-desist order pending a hearing later this month. Meanwhile, Kalshi has filed a lawsuit against the state, arguing that its contracts fall under the exclusive jurisdiction of the CFTC.
Advocates for problem gambling support the governor’s new legislative push. Paul Tarbox, director of public policy for the Connecticut Council on Problem Gambling, described the current environment as the “Wild Wild West.”
Tarbox noted a rise in calls to the state’s gambling hotline linked to these apps. Regardless of whether the activity is legally classified as “investing” or “gaming,” Tarbox said the user behavior is identical to gambling.
The proposed bill does not aim to ban the markets entirely but focuses on instituting safeguards for young residents while the judicial system determines the ultimate legal status of the industry.
