Robinhood's Prediction Markets Face Supreme Court Test in Legal Dispute with New Jersey
New Jersey has petitioned the U.S. Supreme Court to review a legal dispute over whether prediction markets, such as those operated by Kalshi and Robinhood, are subject to state gambling laws or fall under federal commodities regulations. The case centers on conflicting rulings from two appellate circuits—the Third Circuit ruled in favor of Kalshi while the Ninth Circuit recently rejected Robinhood’s similar defense. New Jersey argues that interpreting sports contracts as federally regulated derivatives would place traditional sportsbooks like DraftKings and FanDuel within a Wall Street regulatory framework, which it claims was not Congress's intent. Robinhood has warned investors that adverse court rulings could force it to halt some event contract offerings in certain states. The company reported $156 million in revenue from prediction markets during Q2 2026, making them its second-largest transaction-based income source after options trading. Morgan Stanley recently upgraded Robinhood’s stock rating to Overweight with a price target of $150. The Supreme Court is expected to decide by December whether it will take the case.
