Robinhood Derivatives has filed lawsuits against regulators in New Jersey and Nevada, seeking to block any enforcement action over its sports event contracts.
Robinhood Follows Kalshi’s Lead
The lawsuits were filed Tuesday after federal courts earlier this year ruled in favor of prediction market Kalshi, which had sued both states over cease-and-desist letters related to its sports contracts. Kalshi argued that as a platform regulated by the Commodity Futures Trading Commission (CFTC), state-level enforcement attempts were preempted by federal law.
Event Contracts and Market Competition
Event contracts allow users to take positions on the outcomes of real-world events, ranging from sports games to elections. While the concept resembles traditional sports betting, event contracts are structured as derivatives. Robinhood claims that the inability to compete with Kalshi on equal footing would cause significant harm. 'If regulators are permitted to take action against Robinhood but not Kalshi, then Robinhood will lose out in the event contracts space,' the company stated.
Regulators Push Back
In both lawsuits, Robinhood accuses regulators of disregarding federal court precedent. In New Jersey, Robinhood stated that it reached out to the Division of Gaming Enforcement to clarify its rights to offer event contracts under the court’s ruling. However, the division 'could not agree to refrain from enforcement action,' even with the Kalshi order in place.
The lawsuits highlight a broader regulatory question: whether state gaming laws can override federal oversight of derivatives markets.
