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Read Full BioRobinhood has filed lawsuits in Nevada and New Jersey, preempting any action against the expansion of sports prediction markets to include NFL and college football.
Nevada and New Jersey had both issued cease-and-desist letters to Robinhood, as well as Kalshi, over claims that sports prediction markets were unlicensed sports betting.
Unlike Kalshi, Robinhood responded by pulling the sports markets from users in the two states, but has now followed Kalshi’s action in filing lawsuits. The two companies have a partnership that allows Robinhood users to trade on Kalshi’s markets through its app.
The lawsuits posted on Bloomberg Law cite the fact that Kalshi has won injunctions in both states; therefore, Robinhood is seeking a similar ruling to allow it to offer sports markets.
Robinhood Launches Football Markets
At the same time, the exchange platform has followed Kalshi in expanding football markets. A company announcement states that “customers can now trade on the outcomes of the most popular pro and college football games.”
“Football is far and away the most popular sport in America,” said JB Mackenzie, VP & GM of Futures and International at Robinhood. “Adding pro and college football to our prediction markets hub is a no-brainer for us as we aim to make Robinhood a one-stop shop for all your investing and trading needs.”
A video included in the announcement shows the markets being available on Robinhood’s app.
On Monday, Kalshi announced that it would expand its football markets to include point spreads, totals, and touchdown prop betting; however, when contacted by CasinoBeats, a Robinhood spokesperson confirmed the platform would limit markets to match or championship winner.
The spokesperson added, “Our event contracts, including those for pro and college football, are offered in a compliant, federally regulated way through our CFTC registered Futures Commission Merchant, Robinhood Derivatives. This is a decisive step forward in our mission to democratize finance for all and unlock even more innovative market opportunities for investors.”
Unlike Sports Betting, But Like Sports Betting
State regulators in Nevada and New Jersey have argued that the markets available on Kalshi and Robinhood are, for all intents and purposes, sports betting. Kalshi has also promoted itself as offering betting, but in court claims it does not facilitate wagering.
In the company statement, Robinhood attempted to distinguish the event contracts from betting, noting: “Unlike sports betting, where the firm sets a line, event contracts leverage the power and rigor of financial market structure and are offered in a marketplace where buyers and sellers interact to set the price.”
The lawsuit in New Jersey also attempts to draw a line between betting and trading, stating: “Sportsbooks…have a line set by the house, which is typically set ahead of time and, once a bet is placed, does not change for that bet.”
This argument overlooks price movements, which are common in the lead-up to sports events, as well as the significant odds changes that occur after events go in-play.
Robinhood adds: “Gamblers bet directly against the house, and once a position is entered, gamblers typically do not have the option to exit their position.”
Many sportsbooks, however, do allow users to cash out bets either before or in-play during events.
The lawsuit continues: “Sportsbooks risk exploitation of gamblers due to the power imbalance between the house and the gambler. Based on these different risks, it makes sense that contract markets and sportsbooks are subject to two different modes of regulation.”
Judge Decisions Crucial for Future of Prediction Markets
While judges in Nevada and New Jersey ruled in Kalshi’s favor, a judge in Maryland refused to grant the platform an injunction. The cases remain open, and the rulings in the Kalshi cases are likely to be reflected in the lawsuits filed by Robinhood.
For now, that is what the platform is requesting, seeking a similar injunction that will allow users in Nevada and New Jersey to trade on football games for the upcoming NFL and NCAA seasons.
How long the platforms can continue arguing that their sports markets are not sports betting is yet to be determined.
