Robinhood responds to Missouri cease-and-desist order with lawsuit

Robinhood has filed a lawsuit against the State of Missouri and Attorney General Catherine Hanaway, following several cease-and-desist orders issued by Hanaway on September 18. 

The Missouri AG issued cease-and-desist orders to six prediction market operators, including Robinhood, Crypto.com, Novig, Kalshi, Underdog and Polymarket. 

Since the orders were sent, Crypto.com and Novig have also filed legal action against Missouri, claiming their sports event contracts can only be regulated by the Commodity Futures Trading Commission (CFTC). 

Within the most recent lawsuit, Robinhood Counsel stated: “Missouri’s position rests on the premise that, despite express Federal preemption and the CFTC’s comprehensive regulation of derivatives trading, event contracts listed on CFTC-regulated DCMs and facilitated by CFTC-registered FCMs constitute ‘wagering’ subject to Missouri gaming laws. That premise cannot be reconciled with the CEA.

“Congress vested the CFTC with ‘exclusive jurisdiction’ over DCMs and the products traded on them precisely to establish a single, uniform national derivatives market. Federal courts have long recognized that the CFTC’s regulation of the national derivatives market is exclusive and preempts state involvement.”

Robinhood Counsel cited a decision handed down by a Third Circuit Court in Philadelphia, which ruled in favor of Kalshi by declaring the CFTC maintained exclusive jurisdiction over sports event contracts and preempted New Jersey’s gaming laws.

As part of its lawsuit, the operator is seeking a temporary restraining order, preliminary injunction and permanent injunction against Hanaway and Missouri. 

Robinhood also alleges that Missouri is in violation of the Supremacy Clause, which states that Federal law preempts state law in “any field over which Congress has expressly or impliedly reserved exclusive authority to the Federal government.”

The lawsuit in Missouri represents an opposing strategy to the ones displayed by Robinhood in Ohio and Michigan, where the operator agreed to pull its sports event contracts until respective legal matters in both states were decided.