Robinhood challenges New Jersey and Nevada over sports contracts
Robinhood is challenging state authorities in court, insisting that federal regulators – not states – have jurisdiction over its sports-based contracts.
Robinhood filed lawsuits against regulators in New Jersey and Nevada, seeking a federal ruling that its sports-related contracts are subject to oversight by the Commodity Futures Trading Commission (CFTC), not state gambling authorities.
The brokerage argues that its new platform, Robinhood Connect, offers contracts on professional sports outcomes that should be regulated as financial derivatives. In its lawsuits, the company asked the court to confirm that federal law preempts state gambling restrictions in this area.
According to Robinhood, these products are structured similarly to futures contracts and therefore fall within the jurisdiction of the CFTC. The firm emphasized that treating them as traditional betting activities would misclassify financial instruments as gambling.
State regulators in both New Jersey and Nevada had previously raised concerns, signaling that Robinhood’s offerings might violate their gambling statutes. By moving the dispute to federal court, the company aims to avoid a patchwork of state-level enforcement that could undermine its national expansion plans.
The outcome of the case could set a precedent for how innovative financial products tied to sports events are classified in the United States, potentially shaping the regulatory landscape at the intersection of finance and gambling law.
According to Robinhood, these products are structured similarly to futures contracts and therefore fall within the jurisdiction of the CFTC. The firm emphasized that treating them as traditional betting activities would misclassify financial instruments as gambling.
State regulators in both New Jersey and Nevada had previously raised concerns, signaling that Robinhood’s offerings might violate their gambling statutes. By moving the dispute to federal court, the company aims to avoid a patchwork of state-level enforcement that could undermine its national expansion plans.
The outcome of the case could set a precedent for how innovative financial products tied to sports events are classified in the United States, potentially shaping the regulatory landscape at the intersection of finance and gambling law.
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