Robinhood becomes the latest company in Missouri to sue the state AG over event contract restrictions

• Robinhood is challenging Missouri over the state’s interpretation and application of gaming laws
• The platform argues that it cannot comply with local gaming laws as it would breach its federal obligations
• Furthermore, the products it offers are derivatives - and therefore not subject to local gaming laws

The state of Missouri and the state’s attorney general, Catherine L. Hanaway, have been named in a new lawsuit filed in the U.S. District Court for the Eastern District of Missouri in which the plaintiff, Robinhood, asks the court to intervene and ensure that the company is shielded from what it argues is essentially a faulty interpretation of gaming laws and how they apply to federally regulated exchanges.

Robinhood won’t simply bow out of Missouri as prediction market dispute intensifies

Robinhood, which is an exchange and offers sports event contracts, has argued that the cease-and-desist letter sent to it by the Missouri Gaming Commission ordering it to stop offering such products. This, Robinhood argues, is illegal.

Similar to another lawsuit filed by Kalshi, a rival company, Robinhood maintains that even if it wanted to comply with gaming laws it could not - as its products weren’t covered under state gaming laws, and by attempting to comply, it would simply end up afoul of federal rules that regulate its operations.

Robinhood insisted that the Supremacy Clause must apply in its case, asking the court to grant it a temporary restraining order, preliminary injunction, and permanent injunction against the enforcement of gambling laws against the company in the state of Missouri.

Trying to comply with gaming laws would jeopardize Robinhood’s federal status

Part of the lawsuit focuses on exactly this, arguing that the Commodity Futures Trading Commission’s regulation preempts that of gaming regulators as the subject at hand is derivatives:

"Missouri’s position rests on the premise that, despite express federal preemption and the CFTC’s comprehensive regulation of derivatives trading, event contracts listed on CFTC-regulated DCMs and facilitated by CFTC-registered FCMs constitute ‘wagering’ subject to Missouri gaming laws.

That premise cannot be reconciled with the CEA. Congress vested the CFTC with ‘exclusive jurisdiction’ over DCMs and the products traded on them precisely to establish a single, uniform national derivatives market. Federal courts have long recognized that the CFTC’s regulation of the national derivatives market is exclusive and preempts state involvement."

On the flip side, the state and the AG argue that sports event contracts are just a roundabout way to introduce gambling but not comply with any of the regulations.

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