Massachusetts Regulators Investigate Robinhood Over Illegal Sports Betting ConcernsThe Stock Trading Company Recently Released Prediction Markets For March Madness |
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Massachusetts securities regulators are investigating whether a major stock trading app crossed the line into illegal gambling.
Robinhood recently launched a predictions-market product that allows users to make predictions on a broad menu of events, including the March Madness basketball tournament. Massachusetts Secretary of State Bill Galvin is concerned that the company may have linked sports betting to investing customers.
“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 was also concerned about the company “linking a gambling event on a popular sports event that’s especially popular to young people to a brokerage account.”
The Robinhood options are known as “event contracts” and allow traders “to bet on specific outcomes, offering opportunities to profit from predictions on everything from sports and entertainment to politics and the economy,” Reuters notes.
Company Claims Compliance At A Federal Level
The event contracts have become popular, but some in the industry believe they are more akin to sports betting. Regulators in the Bay State subpoenaed Robinhood for information about its trading options related to college basketball, including marketing materials and a list of users in the state who have engaged in trading on sports events.
Robinhood has responded that the company’s event contracts are regulated by the U.S. Commodity Futures Trading Commission. The basketball options were unveiled a month after suspending a planned offering on the Super Bowl at the urging of the CFTC. The company said it had been in contact with the regulatory body before launching the prediction market offerings.
“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,” a Robinhood spokesperson said.
The trading options come at a time when the NCAA has encouraged states to make college prop bets illegal and some lawmakers have moved to regulate sports betting on the federal level.
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