Massachusetts regulators are investigating Robinhood over the trading app's recently announced 'Predictions Hub', which enables to bet on the outcomes of various events.
Secretary of the Commonwealth of Massachusetts Bill Galvin sent a subpoena to Robinhood demanding copies of marketing materials and details on how many brokerage account users in the state have requested to trade college sports events contracts.
Among the events users are being offered the chance to bet on is the March Madness college basketball games.
Galvin tells Reuters: “This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing."
Robinhood says the event contracts are regulated by the CFTC and offered through CFTC-registered entities, namely KalshiEX.
According to CNN, Robinhood launched the predictions hub weeks after the CFTC asked it to scrap plans to let users bet on the outcome of the Super Bowl.
“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,” the company says it a statement.
This is not Galvin's first tussle with Robinhood. Last year, the company agreed to pay a $7.5 million fine to settle a 2020 case accusing it of using gamification to entice continuous use of its service.