Case 1:25-cv-14723 Document 10-1 Filed 08/19/25 Page 14 of 34 PageID: 86
the contract expires, and prices respond accordingly. These markets may be at risk of market
manipulation and other market distortions and inefficiencies. Sportsbooks, by comparison, have
a line set by the house, which is typically set ahead of time and, once a bet is placed, does not
change for that bet. Gamblers bet directly against the house, and once a position is entered,
gamblers typically do not have the option to exit their position. Sportsbooks risk exploitation of
gamblers due to the power imbalance between the house and the gambler. Based on these
different risks, it makes sense that contract markets and sportsbooks are subject to two different
modes of regulation. The federal regulations that govern commodity futures and swaps trading
have as a major focus creating and maintaining fair and efficient markets for trading, see
17 C.F.R. §§ 38.250, 38.151, whereas sportsbooks are regulated by state law and subject to the
police powers of the state to halt and remedy any exploitation of gamblers.
B.
Futures Commission Merchant Regulation by the CEA and CFTC
Robinhood is registered with the CFTC as a futures commission merchant (“FCM”).
Declaration of James B. Mackenzie in Support of Plaintiff Robinhood’s Motion for a Temporary
Restraining Order and Preliminary Injunction (“Mackenzie Decl.”) ¶ 3. As relevant here, an
FCM is “an individual, association, partnership, corporation, or trust that is engaged in soliciting
or in accepting orders for the purchase or sale of a commodity for future delivery; a security
futures product; a swap” or certain other transactions and “in or in connection with [those
activities], accepts any money, securities, or property (or extends credit in lieu thereof) to
margin, guarantee, or secure any trades or contracts that result or may result therefrom.”
7 U.S.C. § 1a(28) (subsection headings omitted). FCMs must register with the CFTC unless they
fall within certain exemptions. Id. § 6f; 17 C.F.R. § 3.10(c).
Similar to a registered DCM (such as Kalshi), registered FCMs such as Robinhood must
comply with a host of federal requirements. FCMs are subject to reporting requirements to the
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