Massachusetts Regulators Subpoenas Robinhood Over its Newly Launched Prediction Market Hub

By Cheryl L.

On March 25, Massachusetts securities regulators issued a subpoena to Robinhood, investigating its newly launched prediction market hub.

The investigation, led by Secretary of the Commonwealth Bill Galvin, focuses on the platform's marketing practices and user activity related to trading contracts.

According to a March 24 report by Reuters, Galvin expressed concerns about Robinhood's approach, particularly its connection between sports betting-like activities and brokerage accounts. He stated, Robinwood was "linking a gambling event on a popular sports event that's especially popular to young people to a brokerage account."

Robinhood unveiled its prediction markets hub on March 17, 2025, allowing users to trade on the outcomes of various events. These include decisions on the Federal Reserve's target interest rate for May and popular sports tournaments. A spokesperson for Robinhood in a statement said the events contracts it offers are regulated by the U.S. Commodity Futures Trading Commission and offered through KalshiEX LLC, a CFTC-regulated exchange. "We’re excited to offer our customers a new way to participate in prediction markets and look forward to doing so in compliance with existing regulations." stated by JB Mackenzie, Robinhood’s Vice President and General Manager of Futures and International.

This investigation marks a potential return to legal tensions between Robinhood and Galvin's office. In 2020, Galvin accused Robinhood of using "gamification" tactics to encourage inexperienced investors to engage in high-risk trading without sufficient safeguards. The controversy led to a settlement in 2024, where Robinhood agreed to pay $7.5 million to resolve these allegations, as well as to address a separate data security breach uncovered during a 2021 investigation.

"This is just another gimmick from a company that's very good at gimmicks to lure investors away from sound investing," commented by Galvin.

As reported by Reuters, a CFTC spokesperson stated the agency had concluded it "has no legal justification to prevent Robinhood from offering access to these contracts, which are listed on a CFTC-registered exchange."