Robinhood Challenges Massachusetts Over Sports Prediction Market Enforcement

Robinhood Derivatives, а partner of predictions markets operator Kalshi, filed a federal lawsuit on Monday, aiming to prevent Massachusetts regulators from applying state gambling laws to its sports prediction market activities. 

Robinhood Files Lawsuit Against Massachusetts Regulators

In its September 15 filing in the US District Court for the District of Massachusetts, Robinhood requested an injunction to prevent state agencies from regulating its offering of event contracts. The company also requested that the court declare any such state intervention would violate the Supremacy Clause of the US Constitution by improperly attempting to override the federal Commodity Exchange Act (CEA).

The lawsuit marks the latest development in a broader national debate over whether states have the authority to regulate prediction markets that are federally approved. Robinhood claims it was left with no choice but to seek protection in federal court after Massachusetts specifically named the company in its lawsuit against Kalshi. The state alleged that approximately $1 billion worth of Kalshi contracts were traded through Robinhood’s platform in just the second quarter.

In its court filings, Robinhood claims that there is a clear and immediate risk that Massachusetts will file a similar complaint and motion against the company. The lawsuit warns that such enforcement could subject Robinhood to civil and potentially criminal penalties, along with immediate harm to its reputation.

What Does Massachusetts Say?

Massachusetts maintains that prediction markets amount to sports betting, and therefore fall under state licensing requirements, regardless of any federal oversight. Gaming attorney Daniel Wallach observed that Robinhood opted to file its own case in federal court instead of intervening in the ongoing state lawsuit against Kalshi, calling the move an example of “forum shopping” aimed at sidestepping tougher legal scrutiny.

The conflict in Massachusetts is part of a growing wave of legal battles over how prediction markets are regulated at the state level. Courts in Nevada, Maryland, and New Jersey have each considered whether federal commodities law overrides state gambling regulations, resulting in mixed rulings that could ultimately prompt intervention by the US Supreme Court. Robinhood has been very active in this battle, as recently the company has filed lawsuits against New Jersey and Nevada’s regulators, seeking protection for its growing markets.

While Robinhood is busy with lawsuits, some states that have legalized sports betting have issued cease-and-desist orders against Kalshi, though the platform has secured preliminary legal victories in certain jurisdictions. The results of these cases will help decide whether prediction markets can function nationwide under federal regulation or must comply with a fragmented landscape of state gambling laws.