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Robinhood has taken legal action against New Jersey after it had complied with a cease-and-desist order earlier this year. The financial trading platform had been offering predictions markets on sporting events, essentially sports betting contracts.
The New Jersey Division of Gaming Enforcement (DGE) issued cease-and-desist letters to Kalshi and Robinhood in March. While Robinhood complied, Kalshi fought back legally and won a preliminary injunction to keep operating.
Predictions markets have been extremely controversial. Several states are trying to ban them. The DGE has argued that both operators have accepted “unauthorized” New Jersey sports betting wagers.
Robinhood’s claim bolstered by Kalshi decision
Kalshi has had legal success so far in New Jersey. Both companies are federally regulated under the Commodity Futures Trading Commission (CFTC).
Kalshi has argued that the CFTC supersedes state law. A New Jersey judge agreed, awarding it a preliminary injunction that allowed it to keep operating in the Garden State.
Robinhood is taking a similar approach. A spokesperson told Front Office Sports that its sports contracts “are offered in a compliant, federally regulated way through our CFTC-registered Futures Commission Merchant, Robinhood Derivatives.”
The spokesperson added:
“This is a decisive step forward in our mission to democratize finance for all and unlock even more innovative market opportunities for investors.”
The company is also claiming the state’s decision to shut down predictions markets harms its business, along with credibility among customers, which could be hard to regain.
The preliminary injunction Kalshi received bodes well for Robinhood’s case.
