Robinhood isn’t waiting to get sued in Washington state.
The financial services company filed a preemptive federal suit against Washington’s attorney general and gambling commission, arguing the state can’t use its gambling laws to shut down prediction market trading that it contends is authorized under federal commodities law.
The suit comes a few days after Washington Attorney General Nick Brown sued prediction market platform Kalshi in state court. The state takes the position that event contracts — which let users wager on the outcome of real-world activities ranging from NFL games to elections to the number of measles cases in a given year — amount to illegal gambling.
In its lawsuit, filed March 30 in U.S. District Court in Tacoma, Wash., Robinhood argues that federal law preempts Washington’s gambling statutes as applied to event contracts traded on exchanges regulated by the Commodity Futures Trading Commission.
Robinhood Markets, based in Menlo Park, Calif., is known for popularizing commission-free stock trading. The suit was filed by its Chicago-based subsidiary, Robinhood Derivatives.
The company, which is registered with the CFTC as a futures commission merchant, offers event contracts through the Kalshi and ForecastEx exchanges and says it plans to launch trading on a third exchange, Rothera, later this year, according to the complaint.
Pre-emptive move: The company points to the Kalshi suit and a December warning from the state Gambling Commission declaring prediction markets “unauthorized” as evidence that enforcement against the company is imminent.
The complaint was filed on behalf of Robinhood by the law firms Davis Wright Tremaine in Seattle and Cravath, Swaine & Moore in New York.
Robinhood’s suit cites Brown’s statement, at a press conference last week, that Kalshi is “just a bookie with a fancy name, and a huge amount of venture capital behind them.”
The suit says the company had “no choice but to file this lawsuit to protect its customers and its business.”
“[W]e believe in the power of prediction markets and the important role they play at the intersection of trading, news, economics, politics, culture, and sports,” a Robinhood spokesperson said via email, noting that the markets are federally regulated. “This step, consistent with our past actions in other jurisdictions, aims to preserve access for customers in Washington.”
GeekWire has reached out to the Washington AG’s office for comment.
Broader landscape: The case is part of a national wave of litigation over prediction markets. Kalshi is fighting more than 20 civil lawsuits, and Arizona’s AG filed criminal charges last month.
Courts are split on the issue. Federal judges in New Jersey and Tennessee, for example, have ruled that states cannot enforce their gambling laws against federally regulated prediction markets, while state courts in Massachusetts and Ohio have ruled that they can.
Washington state has staked out a broader position than other states in this fight, arguing that all event contracts — not just sports bets — are illegal under state law. Other states have focused their enforcement on sports-related contracts specifically.A bipartisan bill introduced last week by Sens. Adam Schiff (D-Calif.) and John Curtis (R-Utah) would ban sports betting on prediction market platforms.
Read the full complaint below.
Robinhood v. WA state by GeekWire
