Massachusetts issues subpoena to Robinhood regarding sports betting

Securities regulators in Massachusetts have reportedly launched a probe into Robinhood’s prediction markets.

According to a March 24 report by Reuters, Massachusetts Secretary of State Bill Galvin said that his office subpoenaed Robinhood last week to obtain information regarding the company’s marketing materials and the number of users based in Massachusetts who traded sports event contracts linked to college basketball tournaments.

Galvin reportedly raised concerns that the platform was “linking a gambling event on a popular sports event that’s especially popular to young people to a brokerage account” through its predictions market offering.

Robinhood prediction markets are just “another gimmick,” says a regulator

The platform launched its prediction markets on March 17. The offering would initially be made available through Kalshi, which is the first prediction platform to be regulated by the US Commodity Futures Trading Commission (CFTC). 

Once launched, users would be able to initially bet on college basketball tournaments and the May federal funds rate.

This comes a month after Robinhood opted to scrap its betting contracts for the Super Bowl on March 18, following a request from the CFTC. After the request, a CFTC spokesperson said in a statement that there is “no legal justification” to stop Robinhood from offering its betting contracts.

The announcement of the launch had a positive effect on Robinhood’s stock (HOOD), which surged around 8% on the Nasdaq after the news broke, data from Google Finance shows. 

In the last 24 hours, HOOD’s price rose 9%, but some pre-market selling has slightly chipped away at the gain.

According to a Reuters report, Galvin said that Robinhood’s prediction markets are nothing more than “another gimmick from a company that’s very good at gimmicks to lure investors from sound investing. ”

Robinhood is looking to capitalize on the growing prediction market industry

Robinhood’s move into prediction markets comes amid the growing popularity of betting contracts linked to real-world events. 

Competing platform Polymarket rose to fame ahead of the US presidential election. Users bet millions on the decentralized platform, with Donald Trump backers emerging victorious against Kamala Harris supporters.

These prediction markets have since evolved, allowing users to bet on a variety of events, with sports betting becoming a popular option. 

The platform’s spokesperson commented on the rising interest in prediction markets. The spokesperson said, “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.” 

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