Robinhood Sues Washington as Prediction Market Fight Escalates in Ninth Circuit

Financial companies firm Robinhood has sued a number of essential figures in Washington’s authorities, together with Washington Attorney General Nick Brown, in a federal courtroom.

Robinhood’s criticism makes clear that it’s a response to Brown’s lawsuit towards Kalshi and asks the courtroom to enjoin Washington from taking related civil motion towards Robinhood.

Robinhood calls enforcement menace “actual and imminent”

In its petition to the federal court for the Western District of Washington, Robinhood lays out the sequence of occasions that it claims have left it with “no alternative however to file this lawsuit to guard its prospects and its enterprise.” The checklist begins in December 2025 and carries by the ultimate week of March.

• A consumer notice from the Washington State Gaming Commission (WSGC) that emphasised that prediction market buying and selling will not be approved by state regulation
• Brown was one in every of 34 state attorneys normal to submit an amicus brief supporting Maryland’s try to limit prediction markets earlier than the Third Circuit Court of Appeals
• Brown has filed related amici briefs in associated circumstances earlier than the Fourth and Ninth circuits
• Brown sued Kalshi in state court searching for civil penalties and a declaration that prediction market buying and selling violates Washington’s client safety and playing legal guidelines

Brown is among the many defendants named in the lawsuit, however not the only real defendant. The different named events are the members of the WSGC.

Robinhood is asking the courtroom to “enjoin Defendants from imposing preempted Washington regulation towards Robinhood for its facilitation of transactions involving occasion contracts on federally regulated” exchanges. Federal regulation and preemption are on the coronary heart of its argument.

Robinhood leans closely on preemption argument in transient

Robinhood’s plea for defense focuses on the case for federal regulation governing commodities and derivatives preempting any state statutes that may apply. The criticism references the federal Commodity Exchange Act (CEA) and emphasizes that the DCMs (Designated Contract Markets) Robinhood affords are regulated by the United States Commodity Futures Trading Commission (CFTC).

The transient argues, relating to the CEA, that its “legislative historical past and the excellent regulatory framework it units out display that Congress intentionally preempted state regulation.” Additionally, Robinhood says that the CEA “expressly grants the CFTC ‘unique jurisdiction’ over all ‘transactions involving swaps or contracts of sale of a commodity for future supply’ which can be ‘traded or executed on a contract market designated’ by the CFTC.”

To strengthen the argument, the criticism provides that “Congress explicitly included FCMs (Futures Commission Merchants) such as Robinhood inside the intensive set of federal regulatory necessities and CFTC oversight established to handle commodity derivatives buying and selling.”

Robinhood additionally claims that it’ll endure irreparable hurt with out injunctive reduction from the courtroom. Geography and the framework of the federal courtroom system increase the intrigue for this case.

Prediction markets earlier than the Ninth, half deux

The Ninth Circuit’s function in deciding the way forward for prediction markets in the US might have solely simply started. After the courtroom rejected Kalshi’s petition for injunctive reduction towards Nevada gaming regulators, this matter might put related questions earlier than the Ninth once more.

Either Robinhood or any of the named defendants in Robinhood v. Griffin, et al may attraction the choice relating to the injunction that Robinhood seeks to the Ninth Circuit. Should Robinhood be the appellant, the courtroom could be requested to enjoin a state company from imposing state-level rules and statutes towards a web-based platform providing occasion contracts in an change format for the second time in a matter of weeks.

The Ninth might reply precisely as it did to Kalshi’s petition. However, the passage of time and Kalshi’s response to the lawsuit that Brown has filed in state courtroom would possibly have an effect on any attraction to the Ninth.

If each Brown and the WSGC chorus from taking motion towards Robinhood, it weakens Robinhood’s argument that there’s an imminent menace of irreputable hurt. At the identical time, that equates to Robinhood having obtained the safety that it seeks by merely submitting this lawsuit.

What’s subsequent?

Kalshi may sue Brown and/or the WSGC in the district courtroom itself as nicely. The Ninth Circuit has basically already abstained from getting concerned in a virtually equivalent case, which limits Kalshi’s choices for attraction if the district courtroom doesn’t grant the specified reduction.

That litigation is unlikely. Robinhood’s submitting acts as a proxy for that motion on the district courtroom degree, provided that Robinhood affords its prediction change markets in partnership with ForecastEx and Kalshi.

Success for Robinhood in the Western District of Washington may strengthen the precedent for preemption relating to prediction markets and have a chilling impact on Brown’s lawsuit towards Kalshi. The district courtroom’s actions might immediate the Ninth to intervene as soon as extra.

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