Robinhood Fights Back Against Massachusetts Sports Prediction Market Crackdown Over $1 Billion Business
Robinhood Derivatives filed a federal lawsuit yesterday (Monday) seeking to block Massachusetts regulators from enforcing state gambling laws against its sports prediction market operations, jumping into a broader legal fight over who controls event-based trading platforms.
According to Bloomberg Law, the trading subsidiary of Robinhood Markets (NASDAQ: HOOD) sued Massachusetts Attorney General Andrea Joy Campbell and five Gaming Commission officials in federal court, arguing the state lacks authority to regulate its $1 billion quarterly trading volume in sports-related event contracts.
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Robinhood Files Federal Lawsuit To Block Massachusetts From Targeting Sports Prediction Markets
Robinhood’s legal challenge comes three days after Campbell sued prediction market platform Kalshi for allegedly operating an unlicensed sports betting service in the state. The company offers customers access to sports event contracts through a partnership with Kalshi, which operates under federal oversight by the Commodity Futures Trading Commission (CFTC).
“Sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated to mitigate public health consequences,” said AG Campbell. “This lawsuit will ensure that if Kalshi wants to be in the sports gaming business in Massachusetts, they must obtain a license and follow our laws. I am grateful for the ongoing partnership with the Gaming Commission.”
The lawsuit represents the latest escalation in a nationwide dispute over whether states can regulate federally approved prediction markets. Federal courts in Nevada and New Jersey have ruled in favor of platforms like Kalshi, while a Maryland judge recently sided with state regulators.
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Business Protection Drives Legal Action
Robinhood argues it had no alternative but to seek federal court protection after Massachusetts explicitly referenced the company in its lawsuit against Kalshi. The state alleged roughly $1 billion worth of Kalshi contracts traded through Robinhood’s platform during the second quarter alone.
“There is a real and imminent threat that Massachusetts will file a similar complaint and motion against Robinhood,” the company stated in court filings. The lawsuit warns that enforcement action would expose Robinhood to civil and potentially criminal penalties while causing immediate reputational damage.
Preemption Claims Challenge State Authority
The company’s central legal argument rests on federal preemption under the Commodity Exchange Act, which grants the CFTC “exclusive jurisdiction” over derivatives trading on approved exchanges. Robinhood contends that because all actual trades occur on Kalshi’s federally regulated platform, state gambling laws cannot apply.
Massachusetts takes a different view, arguing that prediction markets constitute sports betting that requires state licensing regardless of federal oversight.
Gaming attorney Daniel Wallach noted that Robinhood chose to file in federal court rather than intervene in the pending state case against Kalshi, describing the move as “forum-shopping” to avoid more stringent legal analysis.
Jurisdictional Fight Spreads Nationwide
The Massachusetts dispute adds to mounting legal conflicts over prediction market regulation across multiple states. Nevada, Maryland, and New Jersey courts have all examined whether federal commodities law trumps state gambling authority, producing split decisions that may eventually require Supreme Court resolution.
Five other states with legal sports betting have issued cease-and-desist orders against Kalshi, while the platform has won preliminary relief in some jurisdictions. The outcome of these cases will determine whether prediction markets can operate nationwide under federal oversight or must navigate a patchwork of state gambling regulations.
Robinhood did not hold back, and at the end of August it sued Nevada and New Jersey, alleging that it faces an “immediate threat of civil penalties and criminal prosecution” in both states.
Robinhood Derivatives filed a federal lawsuit yesterday (Monday) seeking to block Massachusetts regulators from enforcing state gambling laws against its sports prediction market operations, jumping into a broader legal fight over who controls event-based trading platforms.
According to Bloomberg Law, the trading subsidiary of Robinhood Markets (NASDAQ: HOOD) sued Massachusetts Attorney General Andrea Joy Campbell and five Gaming Commission officials in federal court, arguing the state lacks authority to regulate its $1 billion quarterly trading volume in sports-related event contracts.
Join IG, CMC, and Robinhood in London’s leading trading industry event!
Robinhood Files Federal Lawsuit To Block Massachusetts From Targeting Sports Prediction Markets
Robinhood’s legal challenge comes three days after Campbell sued prediction market platform Kalshi for allegedly operating an unlicensed sports betting service in the state. The company offers customers access to sports event contracts through a partnership with Kalshi, which operates under federal oversight by the Commodity Futures Trading Commission (CFTC).
“Sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated to mitigate public health consequences,” said AG Campbell. “This lawsuit will ensure that if Kalshi wants to be in the sports gaming business in Massachusetts, they must obtain a license and follow our laws. I am grateful for the ongoing partnership with the Gaming Commission.”
The lawsuit represents the latest escalation in a nationwide dispute over whether states can regulate federally approved prediction markets. Federal courts in Nevada and New Jersey have ruled in favor of platforms like Kalshi, while a Maryland judge recently sided with state regulators.
You may also like: Robinhood Files Fund to Let Retail Investors Buy into Private Firms
Business Protection Drives Legal Action
Robinhood argues it had no alternative but to seek federal court protection after Massachusetts explicitly referenced the company in its lawsuit against Kalshi. The state alleged roughly $1 billion worth of Kalshi contracts traded through Robinhood’s platform during the second quarter alone.
“There is a real and imminent threat that Massachusetts will file a similar complaint and motion against Robinhood,” the company stated in court filings. The lawsuit warns that enforcement action would expose Robinhood to civil and potentially criminal penalties while causing immediate reputational damage.
Preemption Claims Challenge State Authority
The company’s central legal argument rests on federal preemption under the Commodity Exchange Act, which grants the CFTC “exclusive jurisdiction” over derivatives trading on approved exchanges. Robinhood contends that because all actual trades occur on Kalshi’s federally regulated platform, state gambling laws cannot apply.
Massachusetts takes a different view, arguing that prediction markets constitute sports betting that requires state licensing regardless of federal oversight.
Gaming attorney Daniel Wallach noted that Robinhood chose to file in federal court rather than intervene in the pending state case against Kalshi, describing the move as “forum-shopping” to avoid more stringent legal analysis.
Jurisdictional Fight Spreads Nationwide
The Massachusetts dispute adds to mounting legal conflicts over prediction market regulation across multiple states. Nevada, Maryland, and New Jersey courts have all examined whether federal commodities law trumps state gambling authority, producing split decisions that may eventually require Supreme Court resolution.
Five other states with legal sports betting have issued cease-and-desist orders against Kalshi, while the platform has won preliminary relief in some jurisdictions. The outcome of these cases will determine whether prediction markets can operate nationwide under federal oversight or must navigate a patchwork of state gambling regulations.
Robinhood did not hold back, and at the end of August it sued Nevada and New Jersey, alleging that it faces an “immediate threat of civil penalties and criminal prosecution” in both states.
