Robinhood sues Massachusetts regulators over sports prediction market restrictions

• Robinhood filed a federal lawsuit against the Massachusetts Gaming Commission and Attorney General seeking an injunction to prevent restrictions on its event contracts
• The dispute centres on whether Robinhood’s partnership with Kalshi to offer sports prediction markets constitutes regulated trading or illegal sports betting
• Massachusetts claims the platforms handle sports wagering without proper licensing, whilst Robinhood argues federal oversight through the CFTC pre-empts state regulation

Trading platform Robinhood has filed a federal lawsuit against Massachusetts regulators seeking to block enforcement action over its sports prediction market offerings through partner Kalshi.

The company filed the complaint on 15 September in the US District Court of Massachusetts, naming Attorney General Andrea Joy Campbell and the Massachusetts Gaming Commission as defendants.

The legal action follows Massachusetts filing its own lawsuit against Kalshi on 12 September, alleging the prediction market platform operates illegal sports betting disguised as “event contracts” without proper state licensing.

Campbell’s lawsuit claims Kalshi handled more than $1 billion in sports bets from approximately 3.4 million wagers between January and June 2025, with sports contracts accounting for 70-75% of trading volume.

Robinhood argues that Massachusetts lacks jurisdiction to regulate event contracts because they trade on Kalshi’s federally regulated exchange overseen by the Commodity Futures Trading Commission.

The company serves as a futures commission merchant, enabling its 31,000 Massachusetts users to access sports-related contracts through its platform whilst Kalshi operates the actual exchange.

“Sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated to mitigate public health consequences,” Campbell said in a statement. “This lawsuit will ensure that if Kalshi wants to be in the sports gaming business in Massachusetts, they must obtain a license and follow our laws.”

The dispute centres on competing interpretations of federal versus state regulatory authority. Robinhood contends that the Commodity Exchange Act governing futures contracts and the Supremacy Clause of the US Constitution prevent Massachusetts from interfering with federally regulated markets.

State regulators argue that Kalshi’s binary “yes or no” event contracts operate identically to conventional sports betting whilst avoiding licensing requirements, consumer protections, and tax obligations imposed on legal operators.

Massachusetts Gaming Commission Chair Jordan Maynard supported the Attorney General’s enforcement action, stating that prediction market companies are entering sports wagering whilst disregarding age restrictions, player protection programmes, and other consumer safeguards.

Unlike licensed Massachusetts operators, Kalshi permits users aged 18-21 to place bets despite state requirements for 21-year minimum age for sports betting.

Robinhood filed the federal lawsuit preemptively, expressing concern that regulators might extend enforcement to its operations following the state’s action against Kalshi. The company emphasises that it functions solely as an access point for customers to trade on Kalshi’s exchange without managing the trading platform itself.

Legal experts note that Robinhood chose to file in federal rather than state court to avoid more stringent preemption analysis that might favour Massachusetts’ position. Gaming lawyer Daniel Wallach observed that the company “forum-shopped” into federal court as an alternative to intervening in the pending state lawsuit against Kalshi.