Robinhood Challenges Massachusetts on Sports Prediction Market Regulation

Robinhood Initiates Federal Lawsuit Against Massachusetts Authorities

Robinhood Derivatives, collaborating with the prediction markets operator Kalshi, filed a lawsuit in federal court on Monday. The aim is to stop Massachusetts regulators from enforcing state gambling laws on Robinhood’s sports prediction market services.

Details of the Legal Action

In a submission dated September 15 to the US District Court for the District of Massachusetts, Robinhood sought an injunction to block state regulators from overseeing its event contract offerings. The company argued that any such state regulation would infringe on the Supremacy Clause of the US Constitution by conflicting with the federal Commodity Exchange Act (CEA).

This lawsuit represents a significant escalation in the ongoing nationwide debate about state authority to regulate federally approved prediction markets. Robinhood explained that it was compelled to act after Massachusetts formally included the company in its lawsuit against Kalshi, which cited approximately $1 billion of Kalshi contracts being traded via Robinhood’s platform in the second quarter alone.

Robinhood’s court documents indicate an immediate risk of similar enforcement actions being brought against it by Massachusetts, which could lead to civil or criminal penalties and damage to its reputation.

Massachusetts’ Position on Prediction Markets

The state of Massachusetts argues that prediction markets constitute sports betting and, therefore, are subject to state licensing rules irrespective of federal oversight. According to gaming attorney Daniel Wallach, Robinhood’s decision to file its own federal lawsuit — rather than joining the ongoing state case involving Kalshi — is an example of “forum shopping” intended to avoid stricter legal challenges.

Broader Legal Context Across the United States

This dispute in Massachusetts is part of a wider series of legal conflicts concerning the regulation of prediction markets by state governments. Courts in Nevada, Maryland, and New Jersey have reviewed whether federal commodities law supersedes state gambling regulations, leading to varied decisions that may ultimately require resolution by the US Supreme Court.

Robinhood has actively pursued litigation in this space, recently filing suits against regulators in New Jersey and Nevada to safeguard its expanding market operations.

Potential Impact on the Future of Prediction Markets

While Robinhood focuses on legal battles, some states with legalized sports betting have issued cease-and-desist orders against Kalshi. Despite this, Kalshi has achieved preliminary legal wins in certain places. The outcomes of these cases will be critical in determining whether prediction markets can operate under a unified federal regulatory framework or must navigate a patchwork of differing state gambling laws.