Litigation Between Gaming Associations and Predictive Sports Markets? You Wager.

Written By: Matthew H. Benson

On August 19, 2025, Robinhood filed a grievance within the United States District Court for the District of Nevada. It is in search of a everlasting injunction and declaratory aid in opposition to the Nevada Gaming Commission and its members after the Nevada Gaming Control Board despatched KalshiEX (“Kalshi”), a predictive futures market change, a cease-and-desist letter to halt sports-related contract buying and selling. The Board believes Nevada state gaming legal guidelines govern these transactions.

Kalshi lately obtained comparable letters from many different states and has taken some to court docket, together with the New Jersey Division of Gaming Enforcement and its members. Robinhood offers its customers entry to Kalshi’s prediction market platform by its Prediction Market Hub. Robinhood believes that providing these contracts doesn’t violate state gaming legal guidelines as a result of they’re extra much like monetary buying and selling, topic to federal authority and its guidelines on futures buying and selling, somewhat than state or native rules.

The central query is: are predictive sports activities contracts extra like sports activities playing or futures buying and selling? The reply to this query will affect governing authority and jurisdiction, oversight, regulation, client safety, and tax reporting.

What are Sports Related Event Contracts, and How do they Work?

Sports associated occasion contracts are derivatives the place clients can purchase or promote based mostly on the incidence of future occasions (or lack thereof). The occasions are binary, so patrons imagine one thing will occur, and sellers imagine it won’t. When the binary occasion both occurs or fails to occur, those that have been right are paid.

In the sports activities context, one can buy a contract on their favourite staff to beat their opponent, which can sound like sports activities playing. However, Robinhood and Kalshi argue that sports activities associated occasion contracts on predictive market platforms act extra like monetary markets as a result of the price of a contract is predicated on a worth influenced by these shopping for and promoting positions. This differs from sportsbooks which have their odds set internally, and sometimes prohibit customers from getting into and exiting positions.

Who are the Players and How did this Start?

Robinhood is a multi-billion-dollar monetary providers firm, that gained notoriety for uniquely offering its clients with a buying and selling platform providing commission-free trades, interesting to a big portion of retail buyers. It was additionally recognized for being the platform caught up with the GameStop quick squeeze and “meme-stock” craze. Kalshi is a predictive market change for occasion contracts, regulated by the Commodity Futures Trading Commission (“CFTC”), the place customers can purchase or promote futures contracts starting from political elections to future CEOs of huge firms, and now sporting occasions. Robinhood permits its customers the flexibility to purchase and promote these contracts on Kalshi’s platform.

The opposing gamers are State Gaming Commissions and Native American Tribes, who imagine that sports activities associated occasion contracts offered on these platforms are much like sports activities playing, and topic to state, not federal regulation. They, due to this fact, should register with the state, abide by its rules, and pay state taxes. An added layer of complexity is launched now that

Kalshi operates in states that haven’t legalized sports activities betting or playing. Opposing events argue that these platforms are a workaround the present rules and taxes.

The panorama of sports activities betting modified after the 2018 Murphy v. NCAA resolution, the place the Supreme Court struck down an act stopping states from legalizing sports activities betting. Since then, there was a big shift with states legalizing playing and sports activities betting, normally with age necessities and different rules. Now, states generate giant tax revenues from sportsbooks and playing.

Predictive markets date again over twenty years, however there was a breakthrough in June 2023. Kalshi tried to supply licensed political occasion contracts pursuant to necessities of the Commodity Exchange Act (“CEA”). When it was denied, it sued the CFTC within the United States District Court for the District of Columbia, which discovered that these contracts have been allowed underneath the CEA, or federal regulation. The CFTC instantly appealed however moved to drop the enchantment in early May this 12 months.

The Recent Escalation

Following Kalshi’s preliminary victory in court docket and their subsequent announcement providing markets on sporting occasions, the house has seen an inflow of buyers. Kalshi obtained an funding from the CEO of Citadel Securities. Other giant market platforms, like Interactive Brokers, have developed its personal inner contract prediction market. Two weeks in the past, FanDuel, one of many nation’s largest sportsbooks, introduced it might be launching its predictive market platform underneath the Chicago Mercantile Exchange (“CME”), recognized for its futures exchanges. This transfer has implications for future competitors within the house and relationships with Tribes and state authorities.

The reply as to whether these predictive sports activities markets must be regulated by state or federal regulation will probably be answered, at the very least partially, by the present instances involving the Gaming Commissions, Native American Tribes, Kalshi, and Robinhood. In its most up-to-date case, Robinhood obtained a letter that the Nevada Gaming Control Board would think about Nevada clients taking part in sports activities associated occasion contracts to be in violation of Nevada Law. Nonetheless, it has continued to permit its Nevada customers’ entry to sports activities contract buying and selling.

Kalshi has received preliminary aid in its lawsuits with the Nevada and New Jersey Gaming Commissions. The courts have discovered that “Kalshi demonstrated a likelihood of success on the merits concerning its argument that Nevada law is preempted, that it will likely suffer irreparable harm without relief, and that the balance of interests favor injunction.” Robinhood has argued that it ought to be capable of provide the sports activities contracts by Kalshi’s change for so long as that order is in place.

So, are predictive sports activities contracts sports activities playing, or futures buying and selling? With the litany of latest litigation and the binary nature of those lawsuits, solutions are forthcoming, however the consequence is unsure. Who is aware of, perhaps you may wager on it.

Sources  

Gambling or investing? In America, the road is more and more blurred, The Economist: One Big Casino (Aug. 28, 2025), https://www.economist.com/finance-and-economics/2025/08/28/gambling-or-investing-in-america-the-line-is-increasingly-blurred. 

Complaint, Ho-Chunk Nation v. Kalshi Inc, 3:25-cv-00698, (W.D. Wisc.)(Aug. 20, 2025), https://storage.courtlistener.com/recap/gov.uscourts.wiwd.55038/gov.uscourts.wiwd.55038.1.0.pdf. 

Compliant, Robinhood Derivatives, LLC v. Dreitzer, 2:25-cv-01541, (D. Nev.) (Aug. 19, 2025), https://storage.courtlistener.com/recap/gov.uscourts.nvd.176389/gov.uscourts.nvd.176389.1.0_2.pdf. 

Matthew Kulkin and Alexandrea Rahill, Wilmer Cutler Pickering Hale and Dorr LLP, CFTC Regulation of Binary Event Contracts: A History (Apr. 25, 2025), https://www.wilmerhale.com/en/insights/publications/20250430-cftc-regulation-of-binary-event-contracts-a-history. 

Andrew Dulberg et al., Legal Developments within the Gaming Industry: First Half of 2025, Wilmer Cutler Pickering Hale and Dorr LLP (Jul. 18, 2025), – :~:text=3.,college athletics in the state.  

Leo Schwartz, Are sports activities prediction markets betting or investing? Two new Robinhood lawsuits may outline how they’re regulated going ahead, Fortune (August 25, 2025, 6:39 AM), https://fortune.com/2025/08/25/robinhood-kalshi-sports-gambling-betting-prediction-markets-lawsuits/. 

David Purdum & Shwetha Surendran, How Kalshi and Prediction Markets are Disrupting Sports Betting, ESPN (June 2, 2025, 7:45 AM),  https://www.espn.com/espn/betting/story/_/id/45377686/kalshi-prediction-markets-disrupt-sports-betting  

Laura Matthews & Chris Prentice, CFTC strikes to drop enchantment in Kalshi’s occasion contracts case, Reuters (May 5, 2025, 5:54 PM), https://www.reuters.com/markets/commodities/cftc-moves-drop-appeal-kalshis-event-contracts-case-2025-05-05/