- Online casino and sports betting taxes produced $117.9 million in fiscal 2025, out of more than $600 million from licensed gambling.
- The comptroller’s analysts see no evidence yet that prediction markets are displacing licensed Connecticut wagering.
- Connecticut’s cease-and-desist orders against Kalshi are on hold while the exchange’s federal preemption suit proceeds.
- The state’s tax on licensed online casino revenue rises from 18% to 20% in October under the 2021 tribal agreements.
HARTFORD, Conn. – Connecticut collected $117.9 million in taxes on licensed online gambling in the fiscal year that ended June 30, 2025, and state analysts see no evidence yet that prediction markets are cutting into that base, Comptroller Sean Scanlon’s office said in an Aug. 3 economic update.
What Connecticut Actually Taxes
Scanlon’s monthly update gave its spotlight section to prediction markets, naming Kalshi and Polymarket US as the platforms driving the growth, neither holding a Connecticut license. The numbers sit in a section headed “Potential Fiscal Downside,” which sizes what the state could lose.
The exposed slice is narrow. Legal gambling produces more than $600 million a year for Connecticut’s main operating budget, and about half of that is lottery money. Online gaming and sports betting revenue is growing but still accounts for a small share of state revenues, the update says, limiting the potential budget disruption. Indian gaming payments delivered $332.8 million in fiscal 2025, or 1.4% of total general fund revenue, and 64.6% of that came from in-person slot machines taxed at 25% of gross win.
Online play is the part a prediction market can take. The state’s two tribal nations pay 18% on online casino revenue and 13.75% on online sports betting revenue under agreements struck in 2021, which produced the $95.1 million and $22.8 million that make up the fiscal 2025 total. Those two lines grew 28% between fiscal 2024 and fiscal 2025.
Only three brands can legally take that action: FanDuel through Mohegan Sun, DraftKings through Foxwoods and Fanatics as the Connecticut Lottery’s online sports wagering partner. Kalshi and Polymarket US hold no such deal, pay neither rate and price contracts on subjects the licensees are barred from touching, including Connecticut college teams and individual player performances. Both also list US election odds among their markets.
The update’s forecast leaves the question open, projecting low double-digit growth in online gambling tax revenue next year and about 3% annual growth in sports wagering tax revenue as those markets mature. “Prediction markets are the wildcard,” the report says.
The Orders That Stalled In December
The Connecticut Department of Consumer Protection issued cease-and-desist orders to Kalshi, Robinhood Derivatives and Crypto.com on Dec. 2, 2025, finding they offered illegal online gambling and sports betting without a state license and violated the Connecticut Unfair Trade Practices Act. The department also found the platforms took wagers from people under 21 and from people on the state’s voluntary self-exclusion list, and advertised on college campuses.
“Only licensed entities may offer sports wagering in the state of Connecticut,” Consumer Protection Commissioner Bryan T. Cafferelli said in the department’s announcement, quoted in the update.
Kalshi sued the department, Cafferelli, the head of its gaming division and Attorney General William Tong the next day. The exchange argued that a federally designated derivatives exchange falls under the Commodity Futures Trading Commission’s exclusive jurisdiction and that state gambling statutes are preempted.
A judge temporarily paused Connecticut’s enforcement action, and the case is still pending. The CFTC sued Connecticut separately in April, one of at least nine states the agency has taken to court over prediction-market regulation.
The Harm Data Scanlon Cited
The update pairs its fiscal math with loss data. It cites a 2026 academic study finding that roughly 69% of Kalshi users held a loss at the end of the sample period and that the average return on contracts ran about negative 20% before platform commissions. A Wall Street Journal analysis it draws on found the winnings on Polymarket concentrated in a thin band of accounts, with a tenth of a percent of them, largely professional traders and trading firms, taking 67% of the profit.
On problem gambling, the update draws on a 2024 study for the Connecticut Department of Mental Health and Addiction Services that identified 1.8% of state residents as problem gamblers, roughly 50,000 adults, with another 4.9% at risk. A second study of Connecticut college students found 73.8% had gambled in the past year and 8.3% met the definition of serious problem gambling.
Scanlon framed the scale of the platforms in his office’s announcement of a $448.4 million projected surplus, issued the same day. “Prediction markets are literally everywhere and are used to bet on anything which, to me, warrants a lot more attention from government but also all of us in society generally,” he said.
The update’s insider-trading section revisits the military member who traded ahead of Venezuelan President Nicolás Maduro’s capture, one of the cases behind Polymarket and Kalshi’s first insider trading reckoning in May. It notes both platforms added restrictions in recent months and says it is not clear how well they will be enforced.
The Rate Goes Up In October
The taxed side of the market is about to cost licensees more. The online casino rate rises from 18% to 20% in October under the 2021 agreements, widening the cost gap between a licensed operator and an exchange that holds no Connecticut license.
Media outlets now regularly report odds using Kalshi and Polymarket trading data, the update says. Connecticut election odds for the November governor’s race trade on the same platforms the department is trying to bar.
Kalshi’s suit and the CFTC’s April complaint both remain pending, and the update says the fight over state authority could reach the U.S. Supreme Court.
