Robinhood’s latest foray into prediction markets is already under fire — this time from Massachusetts, where the state’s top securities regulator has launched an investigation into the brokerage’s new prediction market hub, which Robinhood partnered with Kalshi to launch ahead of March Madness.
“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing,” Massachusetts Secretary of State Bill Galvin told Reuters.
When Robinhood tried to offer Super Bowl markets earlier this year, the Commodity Futures Trading Commission (CFTC) requested a pause in trading. Robinhood complied and has been engaging with the CFTC ever since.
Prediction markets face pushback
Early commercial prediction markets offered ‘Yes’ and No’ contracts on whether prices of different assets would reach certain thresholds. Many still do, like Robinhood’s market on the target federal funds rate.
Over time, prediction markets have expanded into new categories such as weather, pop culture, and politics. With Crypto.com’s entry into sports, prediction markets have moved into a space traditionally regulated by state gaming authorities since 2018, when the Supreme Court overturned the federal ban on regulating sports betting.
As prediction markets branch into increasingly popular topics, they are beginning to overlap with gambling offerings, prompting regulatory scrutiny. Nevada issued a cease-and-desist order to Kalshi to remove its sports and election contracts from the state. Kalshi received a deadline extension to respond and appears content on contesting.
Massachusetts is just the latest battleground in the growing debate over prediction market offerings, and more challenges are likely to follow. All eyes now turn to the CFTC’s prediction markets roundtable, scheduled for April 30, in which sports event contracts will certainly be a topic of conversation.
