Massachusetts regulator launches investigation into Robinhood’s handling of prediction markets, citing concerns over user data and event contract offerings.
Massachusetts Regulator Probes Robinhood Over Prediction Markets Hub
Launching a New Front in Regulation
Robinhood, the popular trading platform, has launched its Kalshi-powered prediction markets hub, allowing users to bet on the outcome of college basketball tournaments and other events. However, this move has not gone unnoticed by the top securities regulator in Massachusetts, who has launched an investigation into Robinhood’s event contract offerings.
Robinhood is a commission-free trading platform that allows users to buy and sell stocks, ETFs, options, and cryptocurrencies.
Founded in 2013 by Vladimir Tenev and Baiju Bhatt, the platform has gained popularity for its user-friendly interface and zero-commission fees.
As of 2022, Robinhood has over 22 million registered users and is available on both web and mobile platforms.
The company's valuation reached $32 billion in 2021, making it one of the most valuable fintech companies globally.
The Investigation
Massachusetts Secretary of State Bill Galvin has sent a subpoena to Robinhood seeking information about the number of users in Massachusetts that have requested to trade college sports events contracts. The regulator is also requesting copies of Robinhood‘s related marketing materials. ‘We are investigating this matter and will take all necessary steps to protect the interests of Massachusetts investors,’ said a spokesperson for the Secretary’s office. Galvin‘s office confirmed the investigation and stated that Robinhood‘s response to the subpoena is due on April 3.
Background on the Prediction Markets Hub
Robinhood‘s prediction markets hub, powered by the Commodity Futures Trading Commission (CFTC)-regulated Kalshi, launched on March 17 with March Madness-related event contracts. The platform also offers another linked to the upper bound of the target fed funds rate in May. At the time of the launch, ‘we’ve been working closely with the CFTC to ensure that our prediction markets hub is fully compliant with all regulatory requirements,’ said a spokesperson for Robinhood.
Regulatory Context
A spokesperson for Robinhood reiterated that the event contracts offered through its prediction markets hub were ‘regulated by the CFTC and offered through CFTC-registered entities.’ ‘Prediction markets have become increasingly relevant for retail and institutional investors alike, and we are proud to be one of the first platforms to offer these products in a safe and regulated manner,’ said the spokesperson.
Previous Attempt at Launch
The trading platform previously attempted to launch its prediction markets hub in February, ahead of the Super Bowl, but delayed the launch at the request of the CFTC.
