Massachusetts’ high securities regulator has initiated an investigation into Robinhood’s latest choice to launch a prediction-markets hub. This platform permits customers to wager on the outcomes of varied occasions, together with the favored NCAA “March Insanity” school basketball tournaments.
The investigation, led by Secretary of State Invoice Galvin, seeks to scrutinize the implications of linking sports activities betting to brokerage accounts, significantly amongst youthful traders.
Robinhood Defends New Prediction Markets
Galvin expressed his issues in an interview with Reuters, stating that Robinhood’s actions could possibly be seen as a tactic to draw younger traders by means of what he described as a “playing occasion.” He remarked, “That is simply one other gimmick from an organization that’s superb at gimmicks to lure traders away from sound investing.”
As a part of the investigation, Galvin’s workplace issued a subpoena to Robinhood, requesting detailed details about its customers in Massachusetts who’ve expressed curiosity in buying and selling school sports activities occasion contracts.
These occasion contracts allow merchants to guess on particular outcomes, creating alternatives for revenue throughout numerous sectors, together with sports activities, leisure, and politics. Nonetheless, their rising recognition has sparked a contentious debate, with proponents viewing them as a brand new asset class and critics likening them to playing.
The subpoena not solely seeks to establish customers with brokerage accounts who’ve requested to commerce these contracts but additionally calls for copies of Robinhood’s advertising and marketing supplies.
A spokesperson for Robinhood defended the prediction markets, asserting that they’re regulated by the US Commodity Futures Buying and selling Fee (CFTC) and are provided by means of CFTC-registered entities.
“Prediction markets have turn into more and more related for retail and institutional traders alike,” the spokesperson said, emphasizing Robinhood’s dedication to offering these merchandise in a secure and controlled method.
Renewed Authorized Challenges
Robinhood has said that its prediction markets can be accessible throughout the US through the derivatives buying and selling platform KalshiEX, permitting clients to guess on outcomes for the NCAA tournaments.
This launch on March 17 adopted the corporate’s latest scrapping of occasion contracts for the Tremendous Bowl, which occurred only a day after they have been launched on the request of the CFTC.
Regardless of the regulatory scrutiny, a CFTC spokesperson confirmed that the company discovered no authorized grounds to stop Robinhood from providing these contracts, as they’re listed on a CFTC-registered alternate.
Nonetheless, Galvin’s investigation is specializing in Robinhood’s inner communications relating to the choice to supply school sports activities occasion contracts, significantly in mild of the CFTC’s prior steerage.
This investigation shouldn’t be the primary authorized problem Robinhood has confronted from Galvin’s workplace. In 2020, the platform was accused of encouraging “inexperienced traders” to make “dangerous trades” by means of gamified options, resembling celebratory confetti for every executed commerce. The corporate finally agreed to pay $7.5 million in 2024 to resolve these claims and associated points from an information safety breach investigation.
Featured picture from Shutterstock, chart from TradingView.com
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