Robinhood Directed to Terminate March Madness Deals in New Jersey
In the heart of 2025, regulatory actions against Robinhood Markets and its partner Kalshi have escalated, particularly in states like Nevada and New Jersey, with potential further action in Washington State. The controversy surrounds the offering of NCAA basketball tournament event contracts and other sports predictions.
The crux of the issue in Nevada began late last year when Kalshi's sports event prediction contracts, similar to traditional sports bets, drew regulatory scrutiny. The Nevada Gaming Control Board (NGCB) issued a cease-and-desist letter to Kalshi, instructing it to halt operations in the state unless it obtains proper licensing. In response, Kalshi filed a lawsuit against the control board members, arguing that its contracts fall under the exclusive federal jurisdiction of the Commodity Futures Trading Commission (CFTC). The case remains active in court, with significant intervention from the Nevada Resort Association defending state gaming regulations.
Similar legal challenges have been faced in New Jersey. Federal courts have ruled in part that CFTC regulations supersede state gambling laws, enabling Kalshi and Robinhood to continue offering event contracts. However, the New Jersey Division of Gaming Enforcement (NJDGE) has issued a cease-and-desist letter to Robinhood Markets (NASDAQ: HOOD) and partner Kalshi, citing the offering of event contracts on the NCAA basketball tournaments as a violation of state laws. Robinhood and Kalshi are required to respond to the NJDGE in writing prior to midnight tonight.
Washington State could be the next state to target firms offering event contracts. The Washington State Gambling Commission is investigating "predictions markets" as a whole and is unable to discuss the specifics of any active investigations further.
The move comes about a week-and-a-half after Robinhood announced a partnership with Kalshi to offer "yes" and "no" contracts on March Madness games. The event contracts in question are for the NCAA basketball tournaments, specifically March Madness games.
Industry concerns about the expansion of prediction markets into what could effectively become full sportsbooks in all states are growing. Critics argue that Kalshi and the CFTC do not treat these products as gambling, even though they function similarly. Massachusetts Secretary of State William Galvin launched an inquiry into Robinhood and Kalshi's NCAA Tournament contracts, calling the offering gimmicky and adding that the sports contracts are designed to distract market participants from sound investing principles.
The situation is significant given that Nevada and New Jersey are two of the largest sports wagering markets in the US. Regulators' actions are seen as protecting traditional sportsbook operators. The Prudential Center in Newark, a host site for East Regional games this week, is currently a hotspot for this ongoing controversy.
Washington State allows sports wagering but only at tribal casinos. Kalshi is currently offering unauthorized sports wagering to New Jersey residents on collegiate sporting events occurring in New Jersey. The NJDGE Interim Chair, Mary Jo Flaherty, stated that the NCAA Tournament event contracts violate the New Jersey Sports Wagering Act.
As the regulatory landscape evolves, Robinhood and Kalshi continue to offer NCAA tournament event contracts and other sports predictions, navigating through active legal battles and potential further action in various states.
- The Nevada Gaming Control Board (NGCB) has instructed Kalshi to halt operations in Nevada due to regulatory scrutiny over its sports event prediction contracts, similar to traditional sports bets.
- In New Jersey, the New Jersey Division of Gaming Enforcement (NJDGE) has issued a cease-and-desist letter to Robinhood Markets (NASDAQ: HOOD) and Kalshi, citing the offering of event contracts on the NCAA basketball tournaments as a violation of state laws.
- Critics argue that Kalshi and the Commodity Futures Trading Commission (CFTC) do not treat sports event prediction contracts as gambling, despite their similar functions to traditional sports bets, leading to concerns about the expansion of prediction markets.
- Massachusetts Secretary of State William Galvin launched an inquiry into Robinhood and Kalshi's NCAA Tournament contracts, calling them gimmicky and arguing that they distract market participants from sound investing principles.
- The offerings by Kalshi in New Jersey on collegiate sporting events occurring in the state are considered unauthorized sports wagering, according to the NJDGE Interim Chair, Mary Jo Flaherty.
