Robinhood has filed a federal lawsuit against the Massachusetts Attorney General and the Massachusetts Gaming Commission (MGC), seeking an injunction to prevent the state bodies from shutting down its sports event contract trading in the commonwealth.
In the suit filed on Sept. 15 in the U.S. District Court for the District of Massachusetts, Robinhood asked a judge to award it an injunction against the state entities to prevent them from attempting to regulate its involvement in offering event contracts. It also wants the court to declare that any such intervention from the state would violate the Supremacy Clause of the U.S. Constitution by attempting to supercede the Commodity Exchange Act (CEA).
The suit makes several references to the state lawsuit brought against its partner Kalshi by Massachusetts AG Andrea Joy Campbell three days earlier.
Campbell and the MGC sued Kalshi in Suffolk County Superior Court, alleging that the Commodity Futures Trading Commission-licensed designated contract merchant (DCM) is offering what is tantamount to illegal sports betting, in the state’s eyes. The AG’s office and the gaming regulator are seeking an injunction to take Kalshi’s sports contracts offline in the state while the case moves through court.
Kalshi and Robinhood are both embroiled in legal cases in other states including New Jersey, Nevada and California. In Massachusetts, Secretary of State Bill Galvin‘s office told SBC Americas in March that it subpoenaed Robinhood over its sports contracts.
Don’t shoot the facilitator, says Robinhood
In its filing on Sept. 15, Robinhood, which offers sports trading markets powered by Kalshi through a deal signed earlier this year, stressed that it facilitates the placement and liquidation of event contracts, but that the contracts themselves trade on Kalshi’s regulated exchange. Robinhood is a CFTC-licensed futures commission merchant (FCM), an entity that accepts customers’ money on orders to buy or sell futures or swaps contracts. DCMs like Kalshi are the platforms that actually set and operate the markets.
“This means that while Robinhood customers are placing orders for event contract trades in their Robinhood accounts, the trades themselves are taking place on Kalshi’s CFTC-designated exchange,” the filing argued. “The user interface is Robinhood’s instead of Kalshi’s, which is convenient for Robinhood customers but does not affect the way in which trades are executed on Kalshi’s exchange or regulated by the CFTC; it merely adds additional CFTC regulation of Robinhood’s activities as an FCM.”
Robinhood noted that, given its approved partnership with Kalshi, plus the fact that the collaboration was referenced in writing in the Massachusetts government’s lawsuit, it believes that “there is a real and imminent threat that Massachusetts will file a similar complaint and motion against Robinhood.”
Robinhood, which stated in its filing that it has 31,000 customers in Massachusetts, asserted that it would face an immediate threat of civil and potentially criminal penalties as well as irreparable reputational harm if Massachusetts were to take legal action against the company. “Robinhood therefore had no choice but to file this lawsuit to protect its customers and its business,” it added.
Massachusetts’ dim view of prediction markets continues
Robinhood names Campbell and the MGC’s five commissioners, including Chair Jordan Maynard, as defendants. SBC Americas reached out to all three entities for a comment, which the AG’s office declined to offer.
Robinhood told SBC Americas that it has filed the lawsuit in Massachusetts to preserve its customers’ access to federally regulated contract trading, “consistent with our past actions in other jurisdictions.”
