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Massachusetts regulators are reportedly taking a closer look at Robinhood after the company launched a new prediction markets hub. It allows users to place bets on events like March Madness college basketball games on the platform itself, which has been deemed a “gimmick” by some.
A spokesperson for Massachusetts Secretary of State Bill Galvin confirmed to CNN that he sent a subpoena to Robinhood on March 20.
Robinhood rolled out its new prediction markets hub on March 17, giving users a way to bet on all kinds of events, from NCAA basketball games to whether the Federal Reserve will cut interest rates at an upcoming meeting. It works by letting users buy and trade financial contracts based on the outcome of specific events, so it’s essentially a form of betting.
Trade your bracket in our new prediction market hub.
The men’s and women’s college basketball tournaments are now live in the app: https://t.co/oT4wjnqf9U
The first round starts later today, see you then. pic.twitter.com/ndCbHwyvot
— Robinhood (@RobinhoodApp) March 20, 2025
However, Galvin has asked for details by April 3, including information on any Massachusetts residents trying to place bets on college sports, as well as internal communications around the launch of the new hub.
The investigation is part of a growing wave of scrutiny around prediction markets, which have exploded in popularity recently. But with that rise comes a lot of legal gray areas, mainly around where to draw the line between financial trading and online gambling.
Robinhood prediction market ‘lure investors away from investing’
According to Reuters, Galvin said he was concerned that Robinhood was “linking a gambling event on a popular sports event that’s especially popular to young people to a brokerage account.”
“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing.” Galvin, a Democrat, has a reputation as one of the toughest state-level securities regulators in the country.
Robinhood denied wrongdoing. The company wrote in an email: “The event contracts offered by Robinhood Derivatives are regulated by the [Commodity Futures Trading Commission] and offered through CFTC-registered entities.
“Prediction markets have become increasingly relevant for retail and institutional investors alike, and we’re proud to be one of the first platforms to offer these products to retail customers in a safe and regulated manner.”
Kalshi 🤝 Robinhood
Today is a big day: Kalshi launches its first broker, Robinhood.
25 million more people now have exposure to our prediction markets. pic.twitter.com/GW2HzU4tJr
— Tarek Mansour (@mansourtarek_) February 3, 2025
Robinhood’s prediction markets hub is powered by Kalshi, a CFTC-regulated exchange that specializes in event contracts. Kalshi handles the backend, making it possible for users to bet on the outcome of real-world events. The company has made headlines before, especially for offering contracts tied to the outcome of US presidential elections, which have attracted additional scrutiny from authorities.
Featured image: Robninhood
