Robinhood Goes On Offensive in Massachusetts, Sues Attorney General

• Robinhood has filed a lawsuit against Massachusetts Attorney General Joy Campbell
• The lawsuit is in response to Campbell’s own lawsuit against Kalshi
• Robinhood counsel believes Massachusetts law is preempted by the Commodity Exchange Act

Robinhood is going on the offensive in Massachusetts.

The prediction market company filed a lawsuit against Massachusetts Attorney General Joy Campbell, and the Massachusetts Gaming Commission, in direct response to Campbell’s lawsuit against Kalshi. Counsel for Robinhood noted the company “had no choice” but to file the lawsuit to protect its customers and business.

“In light of Massachusetts’s complaint against Kalshi, in which Massachusetts sets forth allegations explicitly referring to Robinhood and the availability of Kalshi’s contracts on Robinhood’s platform, and motion for preliminary injunction filed against Kalshi, Massachusetts v. Kalshi, No. 2584CV02525, Dkts. 1, 4, and because Robinhood intermediates its customers’ event contract trades, including sports-related event contract trades, on Kalshi’s exchange, there is a real and imminent threat that Massachusetts will file a similar complaint and motion against Robinhood.”

Robinhood No Choice But To Sue in Massachusetts

The Attorney General’s Office alleges that Kalshi uses an online exchange to offer sports betting under the guise of “event contracts” in the state. Kalshi, the office notes, has neither applied for nor received a Massachusetts sports betting license from the Massachusetts Gaming Commission (MGC), as required by law.

Robinhood offers sports event contracts in the state through Kalshi’s exchange. Nicholas J. Schneider, counsel for Robinhood, noted in the lawsuit “there is a real and imminent threat that Massachusetts will file a similar complaint and motion against Robinhood.”

“Were it to do so, Robinhood would face an immediate threat of civil penalties and potentially criminal penalties as well, along with the attendant reputational harm that such an enforcement proceeding would cause. Robinhood’s Massachusetts customers would also face abruptly losing access to sports-related event contract trading through their Robinhood account. Robinhood therefore had no choice but to file this lawsuit to protect its customers and its business,” he wrote.

Robinhood trades on a Commodity Futures Trading Commission-designated contract market, Schneider noted, and Massachusetts law is preempted by the Commodity Exchange Act’s framework for regulating commodity futures and swaps trading.

Prediction market companies argue the Commodity Exchange Act has “exclusive jurisdiction” over transactions involving event contracts and that state regulators have little say in what can be offered.

“Robinhood respectfully requests that this Court enjoin Defendants from enforcing preempted MA law against Robinhood for its facilitation of sports-related event contracts,” he noted.

Is it Nothing More Than Sports Betting?

At the heart of the lawsuit — and at the heart of every legal argument regarding sports event contracts — is the question of who has the power to regulate prediction markets in the country?

Campbell and state regulators believe the state has the final say on the contracts, as they mirror sports betting. The companies offering these types of contracts, Campbell said, are nothing more than unlicensed sports betting operators.

“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 Kalsi wants to be in the sports gaming business in Massachusetts, they must obtain a license and follow our laws. I am grateful for the ongoing partnership with the Gaming Commission.”

The Attorney General’s Office alleges that Kalshi uses an online exchange to offer sports betting under the guise of “event contracts” in the state. Kalshi, the office notes, has neither applied for nor received a Massachusetts sports betting license from the Massachusetts Gaming Commission, as required by law. The lawsuit was filed in Suffolk Superior Court in Massachusetts.

Five states have sent cease-and-desist orders to Kalshi. The company has filed lawsuits against Maryland, New Jersey, and Nevada gaming regulators after receiving the notices.