Robinhood and Coinbase Retreat From State Sports Event Contracts Amid Legal Battles

Robinhood, Coinbase, and Polymarket have agreed to suspend sports event contracts in Michigan, while Coinbase is set to halt offerings in Ohio on Nov. 13 ¹. The state-level rollbacks follow mounting regulatory pressure as local officials characterize event contracts on athletic competitions as unlicensed sports wagering, despite operators arguing that federal commodities statutes preempt state gaming rules ¹.

State attorneys general and gaming commissions have secured significant traction in federal appeals courts ¹. Two of the three circuits reviewing the conflict have sided with state jurisdictions ¹. While the Third Circuit determined in April that Kalshi showed merit in arguing federal preemption over New Jersey gaming statutes, the Ninth Circuit supported Nevada in August ¹. In September, the Sixth Circuit ruled that federal derivatives law does not preempt Ohio or Tennessee gambling rules, and the Second Circuit on Nov. 3 declined to freeze New York and Connecticut enforcement actions against Kalshi and Coinbase pending appeal ¹. In Michigan, where Kalshi faced court-ordered daily penalties reaching $500,000, operators complied by pulling sports products ¹. Robinhood has also initiated a lawsuit against Missouri following imminent litigation threats, while Ohio Governor Warns Lawsuits Loom for Prediction Market Operators Over Cease-and-Desist Orders after regulators issued orders across the sector ¹.

Regulatory Crossfire and Revenue Exposure

The state rollbacks threaten a rapidly expanding line of business for top retail brokerages ¹. Robinhood generated $173 million from event contracts in the third quarter of 2026, representing roughly 12% of its total net revenue and surpassing its $120 million in quarterly crypto trading proceeds ¹. Coinbase trades Kalshi-listed derivatives at an annualized revenue pace exceeding $200 million, though Chief Financial Officer Alesia Haas stated on an earnings call that non-sports markets account for more than half of its contract volume ¹. Kalshi itself reached a $40 billion valuation after closing a $1 billion funding round on Oct. 29, processing $98.2 billion in October volume ¹.

Exchanges now face conflicting legal mandates ¹. On Nov. 5, the Commodity Futures Trading Commission issued an interpretation prohibiting exchanges from geo-blocking users on a state-by-state basis, taking effect Tuesday ¹. The directive leaves prediction venues wedged between federal regulators mandating nationwide access and state courts issuing injunctions, pushing the fundamental question of federal preemption toward a potential Supreme Court review as early as January ¹.