Robinhood Gets Probed Over Prediction Markets Disguised as “Gambling Traps”...

Another day, another Robinhood investigation. This time, Massachusetts regulators just hit the epitome of degeneracy with a subpoena-shaped full-court press over their latest move: letting users bet on March Madness games through a prediction-markets hub. Because if there’s one thing Robinhood loves more than millennial retail traders, it’s pushing the boundaries of what regulators consider “investing.”

In short, Massachusetts Secretary of State Bill Galvin—who has made a career out of playing regulator hall monitor—is investigating whether Robinhood’s prediction market is legit finance or just straight-up gambling. The issue is that Robinhood is letting users bet on NCAA basketball tournaments—which sounds a lot less like “investing” and a lot more like DraftKings with extra steps. So because of this, Galvin is worried about “linking a gambling event on a popular sports event that’s especially popular to young people to a brokerage account.” Translation: Galvin is basically saying Robinhood is blurring the line between investing and degenerate sports betting in a way that could get people wrecked. And honestly? He’s not wrong. 

Like I mentioned in one of our other Robinhood stories, this isn’t the $HOODs first rodeo with regulators. In 2020, Galvin’s office accused Robinhood of “gamifying” investing—think: confetti animations every time someone made a trade, like a Vegas slot machine but with options contracts. Then in 2024, Robinhood paid $7.5 million to settle those allegations, along with claims related to a 2021 data breach. Oh, and they’ve also been slapped by the SEC, FINRA, and the CFTC for various infractions, from misleading customers to letting 20-year-olds YOLO into margin trading they didn’t understand.

(Source: CNBC) 

Meaning, now, with prediction markets, Robinhood is once again walking the tightrope between “financial innovation” and “casino in disguise.” Spoiler: It’s a casino. But what’s really interesting here is the timing. Robinhood launched its prediction-markets hub on March 17, just in time for March Madness betting fever. The feature lets users trade contracts on specific outcomes—not just in sports, but potentially in politics, economics, and entertainment. 

Now ICYMI, CFTC already forced Robinhood to shut down Super Bowl betting contracts in February, so they’re clearly pushing the envelope despite warnings. Which is why Massachusetts now wants to know how many users in the state have requested to trade college sports event contracts. The absolute hilarious part about all of this? Trump’s nominee to head the CFTC, Brian Quintenz, has served on the board of KalshiEX, the derivatives trading platform partnering with Robinhood on this. Oh, and Trump Jr. is also a strategic advisor to Kalshi. So yeah, this one’s got layers on layers. 

(Source: CNN) 

So is Robinhood playing with fire here? Well, prediction markets are a hot debate in finance right now. Some say they’re a legitimate way to trade on real-world events, while others say it’s basically FanDuel dressed up in a suit and tie. Supporters argue that prediction markets can provide valuable insight into probabilities—like how betting markets often predict elections more accurately than polls (we saw this very same phenomenon during the election). Critics argue that it’s just another way for people to gamble, and if left unchecked, will turn brokerage accounts into sportsbooks with margin calls. So with Robinhood leading the charge, regulators are rushing to decide where the line is—before retail traders start parlaying their 401(k)s on whether the Fed cuts rates next quarter.

In the end, Robinhood has spent years pissing off regulators—which is just one of the reasons their audience loves them. They go against the grain of everything “normal” in the investing world—and now this is just another example of Robinhoods ongoing battle with the financial rulebook.

(Source: Giphy) 

The only question is, will they get away with it? Maybe. But if history has taught us anything, regulators love making an example out of Robinhood—especially when it involves young, inexperienced investors getting lured into risky bets. For now, Massachusetts is just the first state to take a swing at them. But don’t be surprised if other regulators start joining the fight. 

Because at some point, even Wall Street has to admit that betting on March Madness probably isn’t “investing” LOL. In the meantime, keep your eyes on this legal hammer and place your bets accordingly, friends. As always, stay safe and stay frosty! Until next time… 

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P.S. Just when you thought our beloved congressmen couldn’t get any greasier, one Republican lawmaker decided to YOLO $175k into a stock—right before a major FDIC announcement hit. Lucky timing? Insider edge? You be the judge. We broke it all down inside last week's Stocks.News premium article—click here to check it out ASAP! 

Stocks.News holds positions in Robinhood as mentioned in the article.