Massachusetts Investigates Robinhood Over March Madness Betting Feature

Massachusetts securities regulators have launched an investigation into Robinhood’s recently introduced prediction markets, which allow s to bet on the outcomes of events such as the NCAA men’s and women’s basketball tournaments. The probe, led by Secretary of State Bill Galvin, follows concerns that the platform’s feature may be blurring the lines between investing and gambling.

Investigation into Robinhood’s Prediction Markets

Robinhood’s decision to introduce event-based contracts has drawn scrutiny from Massachusetts officials. Galvin’s office issued a subpoena last week, demanding details on the number of state residents who have requested to participate in college sports-related betting. Additionally, the subpoena requests marketing materials and internal communications regarding the platform’s decision to offer these contracts.

Event contracts, a type of financial instrument, enable s to place bets on various real-world outcomes, including sports, politics, and economic trends. While proponents argue these markets provide insight into public sentiment, critics liken them to gambling, raising regulatory concerns.

Galvin, known for his strict stance on securities regulation, expressed apprehension about Robinhood’s approach. In an interview with Reuters, he stated, “This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing.” His primary concern is the potential for Robinhood to exploit young investors by linking brokerage s with betting opportunities on a popular sporting event.

In response, Robinhood defended its new offering, emphasizing that these event contracts are regulated by the U.S. Commodity Futures Trading Commission (CFTC) and are listed through ed entities. A company spokesperson stated, “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 Regulatory Landscape and Legal Challenges

Robinhood’s prediction markets are available nationwide through KalshiEX, a derivatives trading platform that is CFTC-regulated. This comes after Robinhood abandoned plans in February to offer betting on the Super Bowl, following a request from the CFTC.

Despite regulatory approval from the CFTC, Galvin’s investigation suggests concerns remain at the state level. His office is also seeking internal communications related to Robinhood’s decision to proceed with event contracts despite the CFTC’s previous intervention regarding sports-related betting.

Broader Implications for the Industry

The growing popularity of prediction markets has fueled debates over their classification as investment tools versus gambling platforms. Some lawmakers and industry analysts argue that Robinhood’s approach circumvents traditional sports betting regulations, potentially putting it at odds with licensed sportsbooks that pay significant fees to operate legally.

Kalshi, the platform facilitating these contracts, has responded to criticism by implementing additional consumer protection measures. CEO Tarek Mansour announced a partnership with IC360 to introduce responsible gaming features such as deposit caps and voluntary opt-outs.

Robinhood has previously faced scrutiny from Massachusetts regulators. In 2024, the company settled for $7.5 million over allegations related to its marketing tactics and a data security breach. This latest inquiry adds to the platform’s ongoing regulatory challenges as it expands into new financial products.

Source:

‘’Exclusive: Massachusetts regulators probe Robinhood over March Madness basketball betting’’, reuters.com, March 24, 2025.