Financial services company Robinhood has sued several important figures in Washington’s government, including Washington Attorney General Nick Brown, in a federal court.
Robinhood’s complaint makes clear that it is a reaction to Brown’s lawsuit against Kalshi and asks the court to enjoin Washington from taking similar civil action against Robinhood.
Robinhood calls enforcement threat “real and imminent”
In its petition to the federal court for the Western District of Washington, Robinhood lays out the sequence of events that it claims have left it with “no choice but to file this lawsuit to protect its customers and its business.” The list begins in December 2025 and carries through the final week of March.
- A consumer notice from the Washington State Gaming Commission (WSGC) that emphasized that prediction market trading is not authorized by state law
- Brown was one of 34 state attorneys general to submit an amicus brief supporting Maryland’s attempt to restrict prediction markets before the Third Circuit Court of Appeals
- Brown has filed similar amici briefs in related cases before the Fourth and Ninth circuits
- Brown sued Kalshi in state court seeking civil penalties and a declaration that prediction market trading violates Washington’s consumer protection and gambling laws
Brown is among the defendants named in the lawsuit, but not the sole defendant. The other named parties are the members of the WSGC.
Robinhood is asking the court to “enjoin Defendants from enforcing preempted Washington law against Robinhood for its facilitation of transactions involving event contracts on federally regulated” exchanges. Federal regulation and preemption are at the heart of its argument.
Robinhood leans heavily on preemption argument in brief
Robinhood’s plea for protection focuses on the case for federal law governing commodities and derivatives preempting any state statutes that might apply. The complaint references the federal Commodity Exchange Act (CEA) and emphasizes that the DCMs (Designated Contract Markets) Robinhood offers are regulated by the United States Commodity Futures Trading Commission (CFTC).
The brief argues, regarding the CEA, that its “legislative history and the comprehensive regulatory framework it sets out demonstrate that Congress deliberately preempted state law.” Additionally, Robinhood says that the CEA “expressly grants the CFTC ‘exclusive jurisdiction’ over all ‘transactions involving swaps or contracts of sale of a commodity for future delivery’ that are ‘traded or executed on a contract market designated’ by the CFTC.”
To strengthen the argument, the complaint adds that “Congress explicitly included FCMs (Futures Commission Merchants) such as Robinhood within the extensive set of federal regulatory requirements and CFTC oversight established to manage commodity derivatives trading.”
Robinhood also claims that it will suffer irreparable harm without injunctive relief from the court. Geography and the framework of the federal court system augment the intrigue for this case.
Prediction markets before the Ninth, part deux
The Ninth Circuit’s role in deciding the future of prediction markets in the US may have only just began. After the court rejected Kalshi’s petition for injunctive relief against Nevada gaming regulators, this matter may put similar questions before the Ninth again.
Either Robinhood or any of the named defendants in Robinhood v. Griffin, et al could appeal the decision regarding the injunction that Robinhood seeks to the Ninth Circuit. Should Robinhood be the appellant, the court would be asked to enjoin a state agency from enforcing state-level regulations and statutes against an online platform offering event contracts in an exchange format for the second time in a matter of weeks.
The Ninth may respond exactly 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 court might affect any appeal to the Ninth.
If both Brown and the WSGC refrain from taking action against Robinhood, it weakens Robinhood’s argument that there is an imminent threat of irreputable harm. At the same time, that equates to Robinhood having received the protection that it seeks by merely filing this lawsuit.
What’s next?
Kalshi could sue Brown and/or the WSGC in the district court itself as well. The Ninth Circuit has essentially already abstained from getting involved in a nearly identical case, which limits Kalshi’s options for appeal if the district court does not grant the desired relief.
That litigation is unlikely. Robinhood’s filing acts as a proxy for that action on the district court level, given that Robinhood offers its prediction exchange markets in partnership with ForecastEx and Kalshi.
Success for Robinhood in the Western District of Washington could strengthen the precedent for preemption regarding prediction markets and have a chilling effect on Brown’s lawsuit against Kalshi. The district court’s actions may prompt the Ninth to intervene once more.
