Robinhood’s March Madness Bet Draws Heat from Massachusetts Regulators

Key Takeaways

• Massachusetts Investigation: Secretary of the Commonwealth Bill Galvin issued a subpoena to Robinhood on March 20 over its new prediction markets hub that allows betting on NCAA March Madness outcomes.
• Reuters Broke the Story: The probe was first reported by Reuters and later confirmed by Galvin’s office to CNN.
• Focus on College Sports Betting: Regulators are seeking information by April 3 about Massachusetts residents engaging in bets on college sports and internal discussions related to the hub’s launch.
• Legal vs. Gambling Debate: Galvin criticized the feature as a "gimmick" that blurs the line between investing and gambling, especially targeting young users.

Deep Dive

Robinhood may have expected a slam dunk with its new prediction markets hub, but now it’s drawing full-court press from Massachusetts regulators. The popular trading app is under investigation by the office of Massachusetts Secretary of the Commonwealth Bill Galvin, after launching a new feature that lets users bet on the outcomes of events—starting with NCAA March Madness basketball games. The hub, which went live on March 17, invites users to buy and trade contracts tied to the likelihood of specific outcomes, from sports scores to Fed interest rate decisions.

Think of it as Wall Street meets Vegas, with a mobile interface and a younger demographic. But Galvin isn’t cheering. His office issued a subpoena to Robinhood on March 20, seeking internal communications and data on how many Massachusetts residents are lining up to bet on college sports. His concern? That Robinhood may be blurring the line between investing and gambling—especially among young users.

“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing,” Galvin told Reuters, which first broke the news.

Robinhood, for its part, insists there’s nothing illicit about the offering. A company spokesperson said the contracts are offered through Robinhood Derivatives and regulated by the Commodity Futures Trading Commission (CFTC).

“Prediction markets have become increasingly relevant for retail and institutional investors alike,” the spokesperson said, “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 feature is powered by Kalshi, a CFTC-regulated exchange specializing in event contracts, including ones that have previously stirred debate—like bets on U.S. presidential election outcomes. Just last October, a federal appeals court allowed Kalshi to move forward with election betting, rejecting a watchdog’s attempt to block it.

That ruling opened the door to a new frontier of speculative finance—one that’s drawn attention from curious investors, legal scholars, and now, Massachusetts regulators.

This isn’t Robinhood’s first tangle with Galvin. In January, the company paid $7.5 million to settle older complaints from 2020 and 2021 over allegedly aggressive tactics to encourage trading. So when Robinhood rolled out its latest product—just weeks after scrapping plans to offer Super Bowl betting contracts at the request of the CFTC—it likely knew it was entering sensitive territory.

Now Galvin wants answers, and he wants them by April 3. A spokesperson for the CFTC declined to comment to CNN on the probe. But the agency did weigh in earlier this week, saying its review of Robinhood’s controls found no legal reason to block the company from offering the contracts—at least for now.

So while the prediction markets feature might be legal, the broader question remains whether trading apps that already gamify investing should also be facilitating real bets on real-world events, especially ones designed to attract younger users? Robinhood seems to think there’s a market for it. Massachusetts regulators aren’t so sure.

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