Massachusetts’ top securities regulator has reportedly launched a probe into Robinhood over the popular trading platform’s recent decision to launch an in-app prediction markets hub that allows customers to bet on the outcome of events, including March Madness match-ups.
According to a Monday report from Reuters, Massachusetts Secretary of State Bill Galvin — a notoriously aggressive regulator — sent Robinhood a subpoena last week seeking information about the number of Robinhood’s users in Massachusetts that have requested to trade college sports events contracts, and seeking copies of Robinhood’s related marketing materials.
“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing,” Galvin told Reuters. Galvin’s office confirmed the investigation to CoinDesk, and added that Robinhood’s response to the subpoena is due on April 3.
Robinhood’s prediction market, which is powered by the Commodity Futures Trading Commission (CFTC)-regulated Kalshi, launched on March 17 with March Madness-related event contracts, as well as another linked to the upper bound of the target fed funds rate in May. At the time of the launch, Robinhood told CoinDesk that it had been in communication with the CFTC “in recent weeks” leading up to the launch.
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’re proud to be one of the first platforms to offer these products to retail customers in a safe and regulated manner,” the spokesperson added.
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.