TLDR
- New Jersey regulators issued cease-and-desist orders to Robinhood and Kalshi for unauthorized sports wagering
- Companies must comply by March 28, 2025, or face enforcement actions
- Robinhood has stopped allowing New Jersey residents to place new NCAA tournament bets
- Nevada and Washington state are also taking or considering similar regulatory actions
- The companies argue their products are federally regulated by the CFTC, not subject to state gambling laws
New Jersey regulators have ordered Robinhood and Kalshi to stop offering sports-related prediction markets to residents in the state. The New Jersey Division of Gaming Enforcement (NJDGE) issued cease-and-desist letters to both companies on Thursday, March 27, 2025.
The letters claim the companies are offering unauthorized sports wagering services in New Jersey. The order requires both platforms to stop allowing New Jersey residents to place bets on athletics events and void any existing sports-related wagers from people living in the state.
Robinhood and Kalshi must comply with the order by 11:59 p.m. on March 28, 2025. Failure to do so will result in further enforcement actions from the state regulator.
The cease-and-desist orders come at a critical time for college basketball fans. The NCAA men’s basketball East Regional games began Thursday at the Prudential Center in Newark, New Jersey. The arena will also host an Elite Eight matchup on Saturday.
In response to the order, Robinhood has already stopped allowing New Jersey residents to enter new positions for Men’s and Women’s Basketball Tournament event contracts.
“While we do not believe these contracts run afoul of any state laws, we are no longer allowing New Jersey residents to enter new positions,” a Robinhood spokesperson said.
Kalshi has not yet commented on whether they will comply with the order. A spokesperson for the company told Decrypt that they might comment later.
The NJDGE alleges that both companies are violating the New Jersey Sports Wagering Act. This law “only permits licensed entities to offer sports wagering to patrons located in New Jersey,” according to the regulator.
The order also cites violations of the New Jersey Constitution. State law prohibits residents from betting on any in-state school and from wagering on collegiate sporting events held within the state.
Prediction Markets
This regulatory action is part of a growing pushback against prediction markets focused on sports events. Nevada regulators issued similar cease-and-desist orders to Kalshi earlier this month, requiring the company to stop offering derivatives trading on professional and college athletics events in that state.
Washington state regulators are also considering issuing a similar directive to Kalshi. “We are looking into these types of ‘predictions markets’ as a whole and are unable to discuss the specifics of any active investigations further,” an attorney at the Washington state Gambling Commission said in a statement.
Massachusetts authorities have also taken action. The state’s secretary has subpoenaed Robinhood this week as part of an investigation into its event contracts.
Both Robinhood and Kalshi maintain that their prediction markets are legal under federal law. They argue that event contracts are federally regulated by the Commodity Futures Trading Commission (CFTC), putting them outside of state jurisdiction.
“Event contracts offered by Robinhood Derivatives are federally regulated by the CFTC and offered through CFTC-registered entities, assuring that retail customers can access these prediction markets in a safe and regulated manner,” Robinhood said through a spokesperson.
Kalshi has made similar arguments, stating, “Kalshi believes in the value of regulation and operates under the comprehensive oversight of the Commodity Futures Trading Commission.”
Robinhood partnered with Kalshi earlier this month to launch prediction markets focused on March Madness. The move was designed to capitalize on traders’ growing appetites for sports betting. Legal sports wagers exceeded $140 billion in 2024, up roughly 23% from the year prior, according to CBS Sports.
Kalshi first entered the sports prediction market earlier this year with contracts related to the Super Bowl. The company then expanded to offer single-game betting markets for March Madness in all 50 states. These markets are offered via an exchange as opposed to “against the house.”
The regulatory dispute could have far-reaching implications for the prediction market industry. “The new cease-and-desist letter from New Jersey tees up an imminent lawsuit that could alter the course of sports betting legalization in the U.S.,” says Ryan Rodenberg, a professor at Florida State University whose research focuses on sports gambling policy.
In 2018, a New Jersey lawsuit led to the U.S. Supreme Court overturning a national sports betting ban. This decision cleared the way for states to legalize sports betting.
While Robinhood has restricted New Jersey residents from accessing its NCAA tournament-related contracts, other prediction markets remain available.
Contracts focused on the fed-funds rate, for example, are still accessible in the app’s prediction markets hub for New Jersey users.
