Robinhood’s derivatives division has filed lawsuits against regulators in Nevada and New Jersey, aiming to prevent potential enforcement actions related to its sports event contracts.
In complaints filed Tuesday, Robinhood Derivatives targeted the states’ gaming regulators and attorneys general, noting that it began offering the contracts after federal courts earlier this year allowed prediction market Kalshi to do the same.
The company argued that despite the court rulings favoring Kalshi, Nevada and New Jersey continued efforts to block Robinhood from offering similar contracts, even though the courts had prohibited them from taking such actions against Kalshi for the same transactions.
Kalshi had sued the regulators in March, asserting that cease-and-desist letters regarding its sports betting contracts were invalid because it is overseen by the Commodity Futures Trading Commission. Federal courts in both states sided with Kalshi, halting regulatory enforcement. Both legal battles remain ongoing.
Robinhood Warns of Potential Losses if Sports Contracts Blocked
Robinhood argued that if state regulators are allowed to take action against it while leaving Kalshi untouched, the company could fall behind Kalshi in the sports event contracts market.
Event contracts allow users to wager on outcomes of events like sports games or elections. They are rooted in blockchain technology, which provides transparency and a reliable way to determine the contract’s outcome.
Robinhood stated that its platform enables users to place and settle event contracts that trade on Kalshi.
The company added that, because the states “refuse to recognize the Court’s prior determination that their threatened enforcement is likely preempted by federal law,” it was left with no option but to file the lawsuit to safeguard both its customers and its business.
Regulators Rejected Robinhood’s Claims
In its lawsuits, Robinhood argued that gaming regulators in both New Jersey and Nevada rejected its claims that it should be allowed to offer event contracts following court rulings in favor of Kalshi.
In New Jersey, the company said it reached out to the state’s Division of Gaming Enforcement to explain that it should be permitted to offer the contracts through Kalshi, citing a federal court decision allowing Kalshi to do so. “Division officials informed Robinhood that they could not agree to refrain from enforcement action even while this Court’s order was in place concerning Kalshi,” the company said, adding that regulators failed to respond to multiple requests for a meeting on the matter.
Robinhood reported a similar situation in Nevada, where a federal court ruling favored Kalshi. According to the complaint, the state’s Gaming Control Board told Robinhood that offering the contracts would be considered “wilful violations” of the law and rejected its proposal to temporarily allow Nevada-based users access to the same contracts available on Kalshi.
In both lawsuits, Robinhood has requested that the courts block the regulators from taking action and has sought temporary restraining orders against each state.
