Robinhood is pulling its sports prediction markets out of Michigan, at least for now.
U.S. District Judge Paul L. Maloney last week ordered Robinhood Derivatives, LLC to stop offering new sports-related event contracts to Michigan customers by the end of Wednesday.
Robinhood must then close any remaining Michigan customer positions by the end of October 9. In exchange, Michigan officials agreed not to enforce state sports gambling laws against Robinhood while the company complies.
It is not a ruling that Robinhood’s markets are illegal, nor a victory on federal preemption, either. But in practical terms, Michigan has now pushed another major prediction market distributor to geofence sports contracts in the state while the broader legal fight plays out.
Robinhood steps back
The agreement applies to Robinhood’s sports-related event contracts offered to Michigan customers.
The arrangement is tied to the ongoing Sixth Circuit appeals involving Robinhood, Polymarket, Coinbase and Kalshi, as well as the Michigan court case against Kalshi. It expires upon the first of two possible developments:
- A final resolution of the Sixth Circuit cases, including any Supreme Court proceedings if a party seeks certiorari.
- Dissolution of Michigan’s state-court preliminary injunction in Nessel v. KalshiEX LLC.
Robinhood is not conceding that Michigan has authority over its federally structured products, and Michigan is not conceding that the Commodity Exchange Act preempts state gambling enforcement.
Michigan’s Kalshi order
Robinhood’s decision comes less than a week after Michigan Attorney General Dana Nessel won a preliminary injunction against Kalshi.
An Ingham County Circuit Court judge ordered Kalshi to stop offering, listing, executing, settling or otherwise facilitating sports-related event contracts for anyone located in Michigan. The order reaches products functionally equivalent to conventional online sports betting, including moneyline contracts, parlays, over-unders, in-game markets and proposition contracts.
Kalshi must use a third-party geolocation provider licensed by the Michigan Gaming Control Board to keep Michigan residents, and anyone physically in the state, from accessing the products. The potential consequence for violating the order is up to $500,000 for each day of noncompliance.
Kalshi is the exchange actually listing the event contracts. Robinhood operates as a consumer-facing distribution channel for those kinds of markets. The practical result, however, is the same for Michigan users: the state is making sports prediction markets unavailable while the courts sort out the regulatory boundary.
The judge’s skepticism
Maloney has already made clear his skepticism of the legal theory underlying the companies’ challenge.
In June, he denied preliminary injunction requests from Robinhood and Polymarket, which sought to block Michigan from enforcing its gambling laws while their cases proceed. The platforms argued that the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over their sports-event contracts.
Maloney said Congress had not made the “clear statement” necessary to displace the states’ traditional power to regulate gambling. He questioned whether Congress, in expanding derivatives oversight through the Dodd-Frank Act after the 2008 financial crisis, intended to federalize ordinary wagers on football games.
Maloney did not issue a final merits ruling on the contracts’ legality. But his refusal to block enforcement gave Michigan a meaningful early advantage, and placed Robinhood and Polymarket on a less favorable path as the disputes moved to the Sixth Circuit.
The national battle widens
Michigan is not acting alone. States including Nevada, New Jersey, Maryland, Massachusetts and others have challenged the ability of prediction market operators to offer sports contracts outside state-regulated sportsbook systems.
The Third Circuit sided with Kalshi in New Jersey, finding that its event contracts could qualify as swaps under federal commodities law and that state enforcement was preempted. The Ninth Circuit recently reached the opposite result in Nevada, holding that Kalshi’s sports products were not federally protected swaps and that Nevada could apply its gaming laws.
That direct circuit split helped prompt New Jersey’s request for Supreme Court review.
The Sixth Circuit is now positioned to play a major role in that national conflict. It is considering appeals connected to the Michigan cases, as well as competing decisions from federal courts in Tennessee and Ohio.
