First Circuit oral arguments set as Robinhood preemption case revives

Gaming attorney Daniel Wallach posted one sentence on LinkedIn last week that captured what everyone in prediction market law already understood: "You never know what might pique the appellate court's curiosity."

He was writing about the First Circuit's scheduled oral arguments in Robinhood Derivatives' appeal against Massachusetts gaming regulators. The case was dismissed by Judge Richard Stearns at the district level for lack of jurisdiction and on the merits. What arrives at the First Circuit is technically a threshold justiciability question — whether Robinhood had standing to bring the suit at all. But threshold questions have a way of expanding when appellate judges decide they want to resolve something larger, and the something larger here is one of the most consequential unresolved questions in American commercial law: whether the Commodity Exchange Act displaces state authority to regulate sports-event contracts entirely.

The First Circuit has not yet been asked to answer that question directly. Wallach's point is that it might answer it anyway.

I have watched threshold arguments do exactly this in regulatory litigation. A court that finds standing and then confronts the merits question is a court that sets precedent. The district dismissal gave Massachusetts temporary cover without resolving anything. The appeal strips that cover away.

Simultaneously, the Seventh Circuit accepted Kalshi's petition to appeal a Wisconsin federal court ruling in the Ho-Chunk Nation case. The Wisconsin court held, as the Ninth Circuit held in the Blue Lake Rancheria case, that the Indian Gaming Regulatory Act applies to sports-event contracts offered on tribal lands, rejecting Kalshi's argument that a UIGEA carveout shields CFTC-regulated designated contract markets from IGRA's reach. Two circuits now have live cases on whether federal prediction market regulation overrides tribal gaming authority. If the Seventh Circuit reaches a different conclusion than the Ninth, the conflict is formal.

The conventional read is that Kalshi is fighting too many battles simultaneously — Missouri, Utah, Wisconsin, Massachusetts — and that the weight of state resistance will eventually force a settlement or a legislative compromise. I don't think that's where this lands. The litigation map looks like weakness from a political standpoint and like deliberate forum construction from a legal one. You only need one circuit to hold that the CEA preempts state gambling authority to create the conflict that sends this to the Supreme Court. The CFTC under Chair Selig has already signaled willingness to press that argument at the highest level in the Utah context. A First Circuit ruling that goes further than justiciability — or a Seventh Circuit split with the Ninth — accelerates that timeline materially.

What the Missouri Gaming Commission, the Massachusetts Gaming Commission, and the Ho-Chunk Nation all have in common is that they wrote their briefs assuming the regulatory status quo holds. The status quo holds only if no federal appellate court decides to use one of these cases to say something definitive about the Commodity Exchange Act's scope.