- Robinhood has been dealt a subpoena in reaction to recent launch of sports prediction markets
- Massachusetts regulators claim markets are a way around offering regulated sports betting
- Sports predictions markets bring in over $200 million during March Madness
Robinhood’s sports prediction markets are facing backlash from Massachutetts industry regulators who have launched a probe into what they say is a gimmick to allow unregulated sports betting.
On March 17, in time for March Madness, Robinhood added sports prediction markets to their hub through Kalshi, a US predictions market exchange. Almost immediately, securities regulators in Massachusetts issued a subpoena to Robinhood on March 20. The hub also began offering contracts on predicting Federal Reserve decisions.
Massachusetts Secretary of State Bill Galvin has stated concerns with the links between sports betting and investing on the Robinhood platform.
“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing,” he said.
Robinhood has until April 3 to respond to the subpoena.
“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing.” — Bill Galvin, Massachusetts Secretary of State
Robinhood previously attempted to launch event contracts during the Super Bowl. However, they delayed until the Commodity Futures Trading Commission (CFTC) concluded their risk management assessment. Recently, the CFTC concluded their assessment and deemed they had no legal justification to prevent Robinhood from offering access to these contracts.
Sports predictions markets or events-based contracts allow investors to purchase Yes-or-No contracts on particular events. In the case of March Madness, customers can invest on individual matchups and the outright winner for $1 per contract at a price that fluctuates in real-time based on market sentiment.
Kalshi Sees Over $200 Million in Predictions Markets
The surge in prediction markets has proved especially strong during this season’s March Madness tournament. Kalshi has already recorded over $200 million in trading volume during the tournament earlier this week. Approximately $13 million in contracts were also placed on the women’s tournament.
Legal and regulated sports betting is only allowed in 39 states and many states only offer retail sports betting or sports betting at designated tribal casinos. Kalshi is a regulated exchange platform available in all 50 states. This opens the door for investors all across the country to invest in their opinions on sports, politics, entertainment and other popular events.
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