Massachusetts subpoenaed financial technology company Robinhood last week seeking information about its new sports event futures trading product available in 49 states. It relaunched following behind-the-scenes communication with the Commodity Futures Trading Commission (CFTC).
While the federal CFTC is the de facto overseer of futures trading for now, states are now taking a close look at whether platforms such as the one from Robinhood violate state betting laws. Nevada recently sent Kalshi, the exchange that powers Robinhood’s sports event futures, a cease-and-desist letter.
As Sportico has reported, industry insiders widely view state actions as a greater threat to the burgeoning futures industry than the CFTC.
Reuters was the first to report the Massachusetts subpoena, with Massachusetts Secretary of the Commonwealth Bill Galvin saying that the sports futures trading product “is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing.”
Galvin’s office confirmed the reporting in an emailed statement but declined to provide further comment about whether it would probe platforms in addition to Robinhood.
Robinhood denied wrongdoing. “The event contracts offered by Robinhood Derivatives are regulated by the CFTC and offered through CFTC-registered entities,” wrote a company official in an email. “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 subpoena reportedly asks for copies of Robinhood marketing materials and information about who in the state has engaged in March Madness futures trading through the firm.
Robinhood (HOOD) stock has risen rapidly since it announced it would resume offering sports-related contracts ahead of March Madness. It closed up 9% for the day at $48.36 per share on Monday, and has increased from $36.02 on March 13.
(This article has been updated with Monday’s closing stock price, and has corrected the number of states Robinhood is offering sports events futures in from 50 to 49, as an official said it has not launched in Nevada.)
