Robinhood filed separate federal lawsuits in Nevada and New Jersey on Tuesday, petitioning the courts for an immediate temporary restraining order (TRO) and preliminary injunctive relief to block state gaming regulators from enforcing cease-and-desist orders against its sports event contracts.
Robinhood has been the target of a number of state cease-and-desist orders, along with Kalshi, but until now the retail financial trading platform has largely remained on the defensive. Kalshi, by contrast, has sued state gaming regulators in Nevada, New Jersey, and Maryland.
Kalshi scored initial legal victories in Nevada and New Jersey, the two states Robinhood is now filing in, while the court sided with the state in the first round in Maryland. Kalshi has appealed that decision in a case heading for the US Court of Appeals for the Fourth Circuit (CA4).
Robinhood had ‘no choice but to file this lawsuit’
While federal courts in Nevada and New Jersey have ruled in favor of allowing Kalshi to continue offering its sports markets while those cases play out, Robinhood Derivatives maintains that the same states’ gaming regulators continue to “threaten to enforce preempted [state] law against Robinhood” on the very same contracts.
Robinhood offers event contracts through Robinhood Derivatives in partnership with the CFTC-regulated prediction market exchange Kalshi. The platform announced just yesterday it plans to offer Kalshi’s trading markets on NFL and college football games for the upcoming season. Meanwhile, Kalshi is actively expanding its NFL markets to include spreads, over/unders, and player props, offerings that have traditionally been reserved for sportsbooks.
Robinhood points out it reactivated customer access to sports-related event contracts after the states ruled in favor of Kalshi and that:
“As a result, Robinhood now faces an immediate threat of civil penalties and criminal prosecution from the Division, along with attendant reputational harm that any enforcement proceeding by the Division would cause.”
The complaint in New Jersey claims that Robinhood has attempted to reason with gaming regulators at the Division of Gaming Enforcement, but to no avail.
“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.”
As the lawyers put it in their complaints, these states’ “refusal to acknowledge what this Court has already held — that its threatened enforcement of state law is likely preempted by federal law — Robinhood had no choice but to file this lawsuit to protect its customers and its business.”
Robinhood asks courts to disregard recent Maryland ruling against Kalshi
In its complaint, Robinhood states that the Court “should disregard the Martin decision as lacking persuasive power.”
“Among other defects with the Maryland district court’s reasoning, the court assumes, wrongly and without analysis, that sports-related event contract trading is gambling, and that assumption colors the entire opinion.”
If courts in New Jersey and Nevada double down in granting Robinhood’s motion for TRO and preliminary injunctive relief, it could strengthen the case for sports prediction markets in all 50 states.
But don’t expect a final word on the matter any time soon. We’re more likely to see additional cases filed before any definitive ruling from a higher court like SCOTUS.
