Robinhood sues New Jersey and Nevada over sports event contracts

Robinhood Derivatives filed federal lawsuits against regulators in New Jersey and Nevada, seeking court orders to block state enforcement of gambling laws against its sports event contracts. The company facilitates these contracts through the federally regulated Kalshi exchange.

Robinhood sued the New Jersey Division of Gaming Enforcement and the Nevada Gaming Control Board in their respective federal district courts. Both complaints argue that the Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over these products, blocking state gambling rules.

The lawsuits request injunctions to stop any threatened enforcement related to Robinhood's sports event contracts. Robinhood acts as an intermediary for customer trades on Kalshi, which operates as a CFTC-designated contract market. The company claims state actions could lead to penalties and prosecution despite federal oversight already in place.

Robinhood filed the suits on the same day it announced football prediction markets within its app. It introduced both professional and college football contracts. In its court filings, Robinhood argued that event contracts differ from traditional sports betting, citing open pricing through a buyer-seller marketplace and the ability for customers to enter or exit positions during games.

The complaints reference earlier federal court orders that granted Kalshi preliminary relief in both Nevada and New Jersey. Those rulings found Kalshi would likely succeed in proving state sports-wagering laws are blocked by federal commodities law. However, a Maryland federal judge recently denied similar relief to Kalshi, creating conflicting early decisions.

Robinhood says Nevada and New Jersey continued threatening enforcement even after the Kalshi rulings. The company contacted each regulator to explain why it believed it could offer the contracts legally but received no commitment that officials would avoid taking action. Robinhood also requested temporary restraining orders in both cases.

New Jersey and Nevada attorneys general declined to comment. Cravath, Swaine & Moore represents Robinhood, with local counsel in each state.