REUTERS EXCLUSIVE Massachusetts’ prime securities regulator has begun an investigation into buying and selling platform Robinhood’s choice to launch a prediction-markets hub that permits customers to wager on the outcomes of a spread of occasions, together with March Insanity faculty basketball tournaments.
Massachusetts Secretary of State Invoice Galvin, in an interview with Reuters on Monday, stated he was involved that Robinhood was “linking a playing occasion on a well-liked sports activities occasion that’s particularly well-liked to younger folks to a brokerage account.”
“That is simply one other gimmick from an organization that’s excellent at gimmicks to lure traders away from sound investing,” stated Galvin, a Democrat referred to as one of many nation’s most aggressive state-level securities regulators.
His workplace despatched Robinhood a subpoena final week looking for info associated to what number of of its brokerage account customers within the state have requested to commerce faculty sports activities occasions contracts as the boys’s and girls’s NCAA faculty basketball tournaments acquired below method, an official stated.
Event contracts enable merchants to wager on particular outcomes, providing alternatives to revenue from predictions on every little thing from sports activities and leisure to politics and the financial system.
Their rising reputation has fueled a heated debate between merchants who’ve embraced the nascent asset class and critics who’ve likened it to gambling.
The subpoena seeks copies of Robinhood advertising and marketing supplies and asks the corporate to determine any and all residents within the state with brokerage accounts with the corporate who requested to commerce faculty sports activities occasions contracts, the official stated.
A spokesperson for Robinhood in an announcement stated the occasions contracts it presents are regulated by the U.S. Commodity Futures Buying and selling Fee and provided by CFTC-registered entities.
“Prediction markets have change into more and more related for retail and institutional traders alike, and we’re proud to be one of many first platforms to supply these merchandise to retail clients in a secure and controlled method,” the Robinhood spokesperson stated.
Menlo Park, California-based Robinhood has stated its prediction markets will initially be obtainable throughout the U.S. by derivatives buying and selling platform KalshiEX, and eligible clients will be capable to wager on the outcomes of the upcoming faculty basketball tournaments.
Its unveiling on March 17 got here a month after Robinhood on the request of the CFTC scrapped occasion contracts permitting customers to bet on the outcome of the Super Bowl, only a day after its launch.
Robinhood in saying the launch of its prediction markets forward of the NCAA males’s and girls’s faculty basketball tournaments stated it had been in touch with the CFTC in latest weeks and can proceed to work with the regulator.
A CFTC spokesperson in an announcement stated the company had concluded it “has no authorized justification to stop Robinhood from providing entry to those contracts, that are listed on a CFTC-registered change.”
As a part of its request for data from Robinhood, the subpoena Galvin’s workplace issued is asking for inner communications in regards to the choice to roll out faculty sports activities occasions contracts regardless of the CFTC’s prior request in February, an official stated.
Republican President Donald Trump’s nominee to go the CFTC, Brian Quintenz, has served on Kalshi’s board, and the president’s son, Donald Trump Jr., serves as a strategic adviser to Kalshi.
The case marks the newest authorized standoff between Galvin and Robinhood. In 2020, his workplace accused Robinhood of encouraging inexperienced traders to put dangerous trades with out limits utilizing “gamification” methods, together with having confetti rain down for every commerce made on its app.
Robinhood in 2024 agreed to pay $7.5 million to resolve these claims in addition to points uncovered by one other investigation by Galvin’s workplace right into a 2021 information safety breach.
(Reporting by Nate Raymond in Boston, Modifying by Alexia Garamfalvi, Nick Zieminski and Invoice Berkrot)
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