Massachusetts Launches Investigation into Robinhood's New Prediction Market Hub

Massachusetts securities regulator probes Robinhood's prediction-market hub over concerns it links gambling to brokerage accounts, particularly targeting young investors. The investigation seeks details on contract trades for college sports events. Robinhood, whose offerings are CFTC-regulated, faces criticism for promoting such event betting.

Massachusetts' top securities watchdog has initiated a probe into Robinhood's decision to introduce a prediction-markets platform, allowing users to bet on event outcomes like March Madness basketball. State Secretary Bill Galvin expressed concerns about its potential appeal to young investors alongside traditional brokerage activities.

Galvin, known for his aggressive regulatory stance, criticized Robinhood for using gimmicks to detract from sound investing principles. His office has issued a subpoena to learn how many Massachusetts users requested to trade in college sports events contracts.

While Robinhood asserts its prediction markets are CFTC-regulated and safe, the move has sparked debate on its resemblance to gambling. This inquiry is another chapter in the ongoing legal clashes between Galvin and Robinhood, who settled previous allegations of risky trading encouragement with a $7.5 million payout.

(With inputs from agencies.)