Robinhood and Kalshi have been ordered to immediately suspend their sports-related prediction offerings in New Jersey, following a formal cease-and-desist letter from the New Jersey Division of Gaming Enforcement (NJDGE). The directive, issued Thursday and reviewed by Decrypt, alleges that the companies have violated state gambling laws by enabling unlicensed sports wagering under the guise of prediction markets.
The enforcement action comes in response to a recent product rollout in which Robinhood partnered with Kalshi to offer user wagers tied to March Madness, the annual NCAA basketball tournament. While branded as a financial market product, the NJDGE found the structure and execution of the offering to be functionally identical to traditional sports betting—something that, in New Jersey, only licensed sportsbooks are authorized to provide.
The regulator’s letter not only compels both firms to immediately halt access for New Jersey residents, but also demands the cancellation of all existing wagers tied to sports outcomes from within the state. Robinhood and Kalshi have until 11:59 PM on March 28 to comply or face further enforcement actions.
“This letter shall serve as official notice that Robinhood [and Kalshi], by facilitating and/or accepting unauthorized sports wagering from individuals within the State of New Jersey, is engaging in activity that is unlawful under not only New Jersey law, but New Jersey’s Constitution,” NJGDE Interim Director Mary Jo Flaherty said in the letter.
This development places the companies in the crosshairs of a growing debate over whether prediction markets should be treated as financial derivatives or regulated gambling products—particularly when tied to athletic events.
Prediction Markets Face National Scrutiny as States Push Back
The March Madness prediction markets launched by Kalshi and integrated through Robinhood were designed to tap into the explosive growth of the U.S. sports betting industry, which surged past $140 billion in legal wagers during 2024, according to CBS Sports. But despite mounting interest, prediction market platforms like Kalshi are finding themselves entangled in a widening patchwork of regulatory hurdles across the country.
While Kalshi maintains that its contracts fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC)—framing them as financial instruments rather than gambling products—state regulators increasingly disagree. Earlier this month, Nevada authorities issued a cease-and-desist order barring the company from offering derivatives tied to athletic events. And just this week, Barron’s reported that Washington state officials are weighing similar action.
CFTC Policy Pivot Adds Complexity to State-Level Crackdowns
While Robinhood and Kalshi continue to frame their prediction market products as federally regulated financial instruments, their argument rests on the evolving stance of the Commodity Futures Trading Commission (CFTC)—a regulator with a complicated recent history on this front.
Under former Chairman Rostin Behnam, the CFTC took an aggressive posture against prediction markets, most notably slapping Polymarket with a $1.4 million fine for running an unregistered derivatives exchange. The agency also denied multiple proposals from both Kalshi and Polymarket to offer politically themed event contracts, citing risks to market integrity and potential violations of gambling statutes.
But in a notable departure, Acting CFTC Chair Caroline Pham has adopted a more open-minded approach. Pham has publicly criticized past enforcement actions as overly punitive and signaled her support for “common-sense regulation” that promotes innovation in decentralized finance and event-driven markets. Her comments have been welcomed by many in the crypto and Web3 communities, but they also deepen the regulatory divide between federal tolerance and state-level resistance—making it even harder for platforms like Kalshi to navigate the legal patchwork.
Quick Facts:
- The NJDGE has ordered Robinhood and Kalshi to cease offering sports-related prediction markets to New Jersey residents by March 28.
- The companies’ March Madness prediction markets are deemed unauthorized sports wagering under New Jersey law.
- Similar regulatory actions have been taken in Nevada, with Washington state considering comparable measures.
