Financial services firm Robinhood has filed lawsuits against regulators in Nevada and New Jersey. The company is seeking to stop potential enforcement action over its “event contracts,” which allow users to bet on the outcomes of events like sports games. Robinhood claims the states are overstepping federal authority.
Robinhood Derivatives has initiated legal proceedings against regulators in Nevada and New Jersey, alleging that the states are unjustly obstructing its entry into the sports event contracts market, despite recent federal court judgments in favor of its competitor, Kalshi.
Following a ruling by federal judges earlier this year that Nevada and New Jersey gaming regulators were unable to enforce their bans against Kalshi, which offers contracts regulated by the U.S. Commodity Futures Trading Commission (CFTC), Robinhood began offering event contracts in both states, according to complaints filed on Tuesday.
Robinhood Claims Regulators Creating Uneven Playing Field
Robinhood argued that regulators have disregarded those rulings and have continued to issue enforcement threats, thereby establishing an unequal playing field.
“If state regulators are permitted to act against Robinhood but not Kalshi, Robinhood will be disadvantaged in the sports event contracts sector,” the company stated in its filings.
The lawsuits continue Kalshi’s legal disputes that occurred earlier this year. The prediction market filed a lawsuit against both states after receiving cease-and-desist letters regarding its sports betting contracts. The market argued that the CFTC’s federal supervision superseded state gambling laws.
Although both cases are ongoing, federal courts ruled in favor of Kalshi and prohibited state regulators from intervening.
Robinhood now asserts that the same protection should be extended to its derivatives platform, which enables the trading of event contracts that ultimately resolve on Kalshi.
These contracts are marketed to enhance transparency and truth-resolving mechanisms in markets, enabling users to speculate on outcomes varying from sports games to elections.
In its complaint filed in New Jersey, Robinhood stated that it reached out to the state Division of Gaming Enforcement to verify its ability to operate by the court’s Kalshi ruling.
Officials allegedly declined to commit to standing down and failed to respond to numerous follow-up requests for meetings.
A comparable conflict transpired in Nevada, where Robinhood asserts that the state’s Gaming Control Board warned that it would regard any provision of event contracts as “willful violations” of the law, despite a local federal court’s decision to support Kalshi.
Robinhood has requested that the courts issue orders that prevent regulators from acting against it in both instances.
The company also seeks a temporary restraining order to protect its business while ongoing lawsuits exist.
Robinhood Faces EU Scrutiny Over Controversial Tokenized Stock Launch
In the meantime, Robinhood has faced regulatory scrutiny in the EU due to its introduction of tokenized stock products associated with private companies such as SpaceX and OpenAI.
The Bank of Lithuania has verified that it is investigating the legality and investor disclosures associated with these blockchain-based “stock tokens,” which were introduced on June 30.
OpenAI publicly denied any affiliation, asserting that it did not authorize the tokens and cautioning investors to exercise caution.
The controversy was further exacerbated when Elon Musk, in response to OpenAI’s denial, referred to the firm’s equity as “fake.” However, Musk did not explicitly address the SpaceX tokens.
Robinhood clarified that its tokens are not actual shares but price-tracking derivatives issued on Ethereum’s Arbitrum network and are exclusively available in the EU.
