Robinhood Derivatives LLC, a subsidiary of the crypto provider Robinhood, sued gaming officials in Nevada and New Jersey over sports-related event contracts. The company claimed state officials tried to block trading on outcomes like football games.
The case highlights customers have been placing similar wagers through KalshiEx LLC, a rival platform that the Commodity Futures Trading Commission (CFTC) approved as a contract market nearly five years ago.
The lawsuits came after Robinhood activated sports-related trading in both states without reaching agreements with the Nevada Gaming Control Board and New Jersey Division of Gaming Enforcement. The company said it faces an “immediate threat of civil penalties and criminal prosecution” from state officials.
Federal vs. State Conflict
Earlier this year, federal courts signaled that Kalshi had a strong case. Judges noted that federal law governing commodity futures and swaps likely overrides state restrictions on sports wagers. They also agreed that blocking Kalshi would cause serious harm to its business.
But not every court saw it the same way. A federal judge in Maryland recently rejected a similar request, putting that decision at odds with the rulings in Nevada and New Jersey.
“If states could regulate some but not all entities relevant to these transactions, such regulation would infringe on the CFTC’s exclusive jurisdiction and fracture what Congress intended to be a uniform set of regulations for commodity futures and swaps trading,” Robinhood’s complaints said.
Legal Scuffles Against Robinhood’s Expansion
Robinhood launched its prediction markets hub earlier this year and intermediates trades on Kalshi’s exchange. The suits were filed the same day it launched pro and college football prediction markets.
“Our event contracts, including those for pro and college football, are offered in a compliant, federally regulated way through our CFTC registered Futures Commission Merchant, Robinhood Derivatives,” a spokesperson said. “This is a decisive step forward in our mission to democratize finance for all and unlock even more innovative market opportunities for investors.”
Cravath, Swaine & Moore LLP represents Robinhood. Local counsel includes Pisanelli Bice PLLC in Nevada and Chiesa Shahinian & Giantomasi PC in New Jersey.
This clash between state gaming rules and federal derivatives regulation and its outcome could shape sports-related trading and prediction markets in the U.S. It may also influence future legal challenges for other platforms.
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