Robinhood has filed lawsuits against regulators in Nevada and New Jersey, accusing them of illegally blocking its sports event trading contracts despite favorable federal court rulings.
Key Takeaways
- 1Robinhood sued Nevada and New Jersey over threats to penalize its sports-related event contracts.
- 2The company claims state regulators ignored federal rulings that allowed rival Kalshi to offer similar products.
- 3Robinhood is seeking temporary restraining orders and court protection to keep its platform operational.
- 4The move marks a growing legal battle over state versus federal control in the prediction markets space.
What Happened?
Robinhood Derivatives LLC filed lawsuits against gaming regulators and attorneys general in Nevada and New Jersey. The legal actions aim to block state enforcement of gaming laws that threaten to shut down Robinhood’s offering of sports-based event contracts, despite similar products being cleared federally through Kalshi, a Commodity Futures Trading Commission (CFTC) regulated exchange.
Robinhood Says States Are Violating Federal Law
Robinhood began offering event contracts in both states shortly after federal judges earlier this year barred regulators from blocking Kalshi from doing so. Kalshi had sued the same state authorities in March after receiving cease-and-desist letters over its sports-related contracts. Courts in both states sided with Kalshi, stating federal commodities laws likely override state gambling restrictions.
Robinhood is not just a trading app anymore and with kalshi it is now building prediction markets on NFL and NCAA games.
— Ignacio Palomera (@MrIPalomera) August 19, 2025
On paper, it looks like a natural extension. Football is america’s biggest sport so liquidity is guaranteed but the framing is crucial. Robinhood doesn’t call… pic.twitter.com/fHOiJ52EnD
But according to Robinhood, state officials are now treating the two companies unequally.
Robinhood says it reached out to both the New Jersey Division of Gaming Enforcement and Nevada’s Gaming Control Board to clarify its legal standing under the Kalshi rulings. In both instances, regulators refused to commit to standing down or ignored meeting requests altogether. In Nevada, Robinhood was warned that offering these contracts could be viewed as “willful violations” of state law.
What Are Event Contracts?
Event contracts allow users to place trades on the outcomes of real-world events like election results or sports games. These are positioned as a financial instrument similar to futures or swaps, regulated by the CFTC. Robinhood offers access to these contracts through Kalshi’s exchange and argues that the contracts are federally compliant.
Robinhood launched its prediction markets earlier this year, with a particular focus on NFL and NCAA football. The company emphasized that its contracts are “offered in a compliant, federally regulated way” through its CFTC-registered platform.
Robinhood Seeks Court Protection
To continue operating in both states, Robinhood is now requesting:
- Temporary restraining orders to prevent immediate enforcement actions
- Permanent court orders to stop regulators from interfering
- Legal acknowledgment that its operations are protected under federal law
Cravath, Swaine & Moore LLP is representing Robinhood in both cases, alongside local legal teams in Nevada and New Jersey.
Federal vs State Regulation Battle
This legal showdown underscores a growing friction between state-level gambling enforcement and federally regulated financial products. Both Kalshi and Robinhood claim their offerings fall under the jurisdiction of the CFTC, not state gaming authorities. But state officials are pushing back, arguing that these contracts resemble gambling on sports outcomes.
Meanwhile, Robinhood is also under scrutiny in the European Union over its launch of tokenized stock derivatives linked to companies like OpenAI and SpaceX. That investigation is unrelated but highlights the platform’s increasing regulatory challenges as it expands beyond traditional stock trading.
CoinLaw’s Takeaway
Honestly, I think this case is going to become a landmark battle over who gets to define financial products in the prediction market space. In my experience, when federal regulators like the CFTC say something is legal, it usually gives companies the green light to expand. But when states push back, it creates this messy grey area. Robinhood is right to demand clarity, and it looks like they are drawing a firm legal line. I found their approach aggressive but necessary, especially when courts already sided with Kalshi. This is about fairness, competition, and who gets to shape the future of financial innovation.
