Massachusetts regulators have launched an investigation into Robinhood’s new prediction-markets hub, which allows users to bet on various events, including the NCAA March Madness basketball tournaments.
Bill Galvin, the Secretary of the Commonwealth, expressed concern about Robinhood linking such gambling events to users’ brokerage accounts. He highlighted that the platform’s association with a popular event like March Madness could potentially target younger, more impressionable audiences.
“This is another tactic from a company known for gimmicks, designed to divert investors from sound financial decisions,” said Galvin, a vocal critic of financial practices that he deems harmful to consumers.
Last week, Galvin’s office issued a subpoena to Robinhood, requesting information on how many users in Massachusetts were engaging in betting on the NCAA tournaments via event contracts. These contracts allow traders to speculate on various outcomes across sports, entertainment, politics, and the economy, fueling a debate between those who see it as a legitimate asset class and critics who compare it to gambling.
The subpoena demands copies of Robinhood’s marketing materials and a list of Massachusetts residents who requested to trade college sports event contracts. Robinhood responded by stating that their event contracts are regulated by the U.S. Commodity Futures Trading Commission (CFTC) and are offered through CFTC-registered entities.
“Prediction markets are becoming increasingly popular with both retail and institutional investors, and we are proud to offer these products in a safe, regulated manner,” a Robinhood spokesperson said.
Robinhood introduced the prediction markets on March 17, just ahead of the NCAA basketball tournaments, through KalshiEX, a derivatives trading platform. However, this follows the platform’s decision to cancel a similar offering for the Super Bowl, after the CFTC raised concerns.
Despite the controversy, a CFTC spokesperson affirmed that there were no legal grounds to block Robinhood’s access to these markets, as the contracts are listed on a CFTC-registered exchange.
Galvin’s subpoena also seeks internal communications regarding the decision to launch college sports event contracts, especially after the CFTC’s prior February request to halt them.
The ongoing scrutiny of Robinhood is part of a broader regulatory battle. In 2020, Galvin’s office accused Robinhood of encouraging risky trading through “gamification” techniques, such as confetti animations for each trade. In 2024, Robinhood settled these claims by agreeing to a $7.5 million payout, which also addressed a 2021 data security breach.
This latest investigation adds to the complex legal landscape surrounding Robinhood, a company that continues to challenge traditional investment platforms and regulatory boundaries.
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