Robinhood Told to Scrap March Madness Contracts in New Jersey

• Regulatory action comes ahead of massive weekend of college hoops betting
• Partner Kalshi also told to cease-and-desist in New Jersey

The New Jersey Division of Gaming Enforcement (NJDGE) issued cease-and-desist letters to Robinhood Markets (NASDAQ: HOOD) and partner Kalshi, telling the companies to halt offering event contracts on the NCAA basketball tournaments.

The move comes about a week-and-a-half after the financial services announced it was teaming up with Kalshi to offer “yes” and “no” contracts on March Madness games  and just days before one of the biggest college basketball betting weekends of the years. On the men’s side, some Sweet 16 games remain tonight with passage to the Final Four lingering on the weekend slate.

In letters to Robinhood CEO Vlad Tenev and his counterpart at Kalshi — Tarek Mansour — NJDGE Interim Chair Mary Jo Flaherty said the NCAA Tournament event contracts violate the New Jersey Sports Wagering Act.

Further, Kalshi is currently offering unauthorized sports wagering to New Jersey residents on collegiate sporting events occurring in New Jersey in violation of the New Jersey Constitution,” she wrote. “That constitutional provision mandates that ‘wagering shall not be permitted on a college sport or athletic event that takes place in New Jersey or on a sport or athletic event in which any New Jersey college team participates regardless of where the event takes place.’”

While New Jersey’s college wagering law is viewed as arcane by some bettors, it is the law of the state and it’s pertinent now because the Prudential Center in Newark is a host site East Regional games this week. Kalshi and Robinhood are required to respond to the NJDGE in writing prior to midnight tonight.

New Jersey Not First State Taking Aim at Robinhood, Kalshi

This isn’t the first time Robinhood and Kalshi have encountered state-level regulatory headwinds with sports event contracts.

Earlier this month, the Nevada Gaming Control Board (NGCB) told Kalshi to halt operations in the state. That move wasn’t motivated by college basketball contracts, but rather the broader suite of Kalshi derivatives, including those based on elections. Nevada regulators have since granted the company an extension, but made clear event contracts of any form aren’t legal in the state unless approved by the Nevada Gaming Commission (NGC).

Nevada and New Jersey are two of the largest sports wagering markets in the US, implying that moves by regulators in those states directed at Kalshi and Robinhood are designed to protect traditional sportsbook operators.

Washington State Could Join the Group

In what might be a sign of following politically similar states, Washington State could be the next state to target firms offering event contracts.

“We are looking into these types of ‘predictions markets’ as a whole and are unable to discuss the specifics of any active investigations further,” said an attorney for the Washington State Gambling Commission in a statement provided to Barron’s.

That state allows sports wagering, but only at tribal casinos.