Robinhood has filed a federal lawsuit against Massachusetts regulators. They seek to prevent state gambling laws from being applied to prediction markets offered through Kalshi.
The suit, filed this week in U.S. District Court in Boston, comes just days after Attorney General Andrea Campbell sued Kalshi in state court. Campbell alleges the company was effectively promoting unlicensed online sports betting.
“Sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated to mitigate public health consequences,” Campbell said. “This lawsuit will ensure that if Kalshi wants to be in the sports gaming business in Massachusetts, they must obtain a licence and follow our laws.”
Robinhood Pushes Back
Robinhood, which launched Kalshi’s football prediction markets on its platform this season, argues that Massachusetts law does not apply. They claim this is because Kalshi is regulated by the U.S. Commodity Futures Trading Commission (CFTC). The trading app says state intervention would conflict with federal law under the Commodity Exchange Act.
“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 company said in its filing. It warned that state enforcement could cause “irreparable harm” to its business.
Wider Legal Battle Over Prediction Markets
The Massachusetts dispute adds to a patchwork of litigation nationwide. Both Robinhood and Kalshi are facing lawsuits in Maryland, New Jersey, and California. Furthermore, Kalshi has previously secured injunctions blocking enforcement efforts in New Jersey and Nevada.
The case also underscores Robinhood’s tense relationship with Massachusetts regulators. In January 2024, it paid a $7.5 million fine over allegations of encouraging risky trading. Earlier this year, Secretary of the Commonwealth Bill Galvin subpoenaed the company over NCAA Tournament prediction markets.
