Massachusetts regulators are investigating Robinhood's new predictions-market product that allows users to make bets on various events, such as sports. Secretary of State Bill Galvin expressed concerns about the potential for linking gambling with investing, especially targeting younger investors. The product, known as event contracts, invites speculation on outcomes ranging from sports to politics. Although Robinhood claims compliance under federal regulations, scrutiny from the state includes subpoenas for marketing and user data, raising questions about the legality of their offerings in relation to gaming laws.
"This is just another gimmick from a company that's very good at gimmicks to lure investors away from sound investing," Galvin told Reuters.
"Robinhood has responded that the company's event contracts are regulated by the U.S. Commodity Futures Trading Commission."
"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 company spokesperson said.
"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."
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