Robinhood Markets Inc. (NASDAQ:HOOD) generated $156 million from event contracts in Q2, making prediction markets its second-largest transaction-based revenue line behind options. A new Supreme Court petition could help determine how freely its sports contracts can operate across the U.S.
New Jersey on Wednesday asked the court to overturn a Third Circuit ruling favoring Kalshi and decide whether sports contracts traded on federally regulated exchanges can escape state gambling laws, Reuters reported.
Polymarket traders put the chance of the Supreme Court accepting a sports-event-contract case by Dec. 31 at about 45%. The market measures whether the court takes a case, not which side would win.
The legal backdrop helps explain those odds. The Third and Ninth Circuits have reached opposite conclusions on the same federal-law question, creating the type of appeals-court split the Supreme Court considers when deciding whether to take a case.
Robinhood Is Already Fighting the Same Battle
The Ninth Circuit ruled against Robinhood Friday, finding its sports contracts were not “swaps” under federal commodities law and allowing Nevada to apply its gambling laws. Robinhood said it plans to appeal, according to Reuters.
The company has warned investors that adverse court rulings could force it to stop offering some event contracts in certain states.
New Jersey Says Kalshi’s Logic Creates a Sportsbook Paradox
Kalshi argues its sports contracts are federally regulated derivatives overseen by the CFTC, rather than gambling products subject to state law.
New Jersey says that interpretation leads to an unlikely result.
If sports bets are federally regulated swaps, Dodd-Frank generally requires them to trade through regulated derivatives markets. State-licensed sportsbooks would therefore have “apparently been violating Dodd-Frank all along,” New Jersey said in its Supreme Court petition.
That would sweep traditional operators such as DraftKings Inc. (NASDAQ:DKNG) and Flutter Entertainment PLC (NYSE:FLUT)-owned FanDuel into the same federal derivatives framework.
New Jersey argues that Congress never intended a Wall Street reform law to turn ordinary sports betting into federally regulated derivatives.
Kalshi spokeswoman Dani Lever said the company is “an open, nationwide financial exchange” that “cannot be regulated by 50 different regulators.”
Morgan Stanley this week upgraded Robinhood to Overweight with a $150 target, citing prediction markets as a key growth driver.
Kalshi and Benzinga have an existing data collaboration agreement.
Image: Shutterstock
Login to comment