Robinhood Sues Massachusetts Over Sports Prediction Crackdown

Robinhood Derivatives has taken Massachusetts regulators to federal court in a bid to stop them from classifying its sports contracts as illegal gambling, intensifying a national battle over who has the right to police event-based trading platforms.

The lawsuit, filed Monday in US District Court in Boston, names Attorney General Andrea Joy Campbell and five members of the state’s Gaming Commission. Robinhood, a subsidiary of Robinhood Markets (NASDAQ: HOOD), argues that Massachusetts lacks authority to regulate what it calls federally supervised derivatives markets.

The move comes just days later than Campbell sued Kalshi, the platform that supplies Robinhood’s event contracts, saying its sports-based products amount to unlicensed sports betting. The complaint accused Kalshi and its partners of bypassing consumer secureguards built into Massachusetts’ 2022 sports wagering law, such as the 21-year-old minimum age and hardy-gambling protections.

At the heart of the dispute is whether contracts tied to the outcome of real-world events—such as whether a football team will win a playoff—should be treated as regulated derivatives or state-licensed wagers. Robinhood’s case argues the Commodity Futures Trading Commission (CFTC), not state gambling boards, has sole jurisdiction.

Robinhood has reason to fight. Its customers traded roughly $1 billion worth of event contracts in the last quarter, with sports accounting for a large slice. That activity generated an estimated $10 million in quarterly revenue. A state-by-state licensing patchwork could choke growth of a business the company has told investors is gaining traction.

The standoff has been building for years. Kalshi, founded in 2020, won designation as a CFTC-regulated contract market, allowing it to list event contracts alongside more traditional commodities futures. It has since tested the boundaries with political and sports contracts. Last year in court later than the regulator tried to stop it from listing political election markets, giving the company momentum to push further.

States, however, view sports as their domain. Since the Supreme Court struck down the federal ban on sports betting in 2018, legislatures have built intricate licensing regimes and tax structures. Regulators worry that federally overviewn sports contracts could operate as sportsbooks in disguise, without local age checks or revenue sharing. Campbell has made sports-style products a focus of her consumer-protection platform, targeting daily fantasy pick-em contests last year and now moving against Kalshi and Robinhood.

Massachusetts has clashed with Robinhood before. In 2024 the firm agreed to pay $7.5 from state securities regulators that its app’s “gamification” encouraged risky behavior by retail investors. That legacy of mistrust is likely to color how the latest lawsuit is viewed in Boston.

Federal preemption is the key legal issue. Robinhood and Kalshi argue the Commodity platform Act gives the CFTC exclusive jurisdiction, meaning states cannot relabel approved contracts as gambling. Courts are split. In Maryland, a federal judge recently refused to block state action against Kalshi, rejecting the identical preemption theory. Appeals are pending in other circuits, and Massachusetts now gives another venue for the fight.

For Robinhood, the stakes go beyond Massachusetts. If states succeed in regulating—or banning—sports event contracts, it could undermine the firm’s push to diversify beyond . If courts side with Robinhood, event contracts could solidify as a federally regulated product, free from 50 diverse gambling regimes.

As the lawsuits stack up, the question of who controls prediction floor to the courtroom