Robinhood Faces Heat for Mixing Betting With Investing

State regulators have started looking into how the company promoted these new features and how many users in the state took part, including contracts tied to college basketball games.

The investigation is led by Secretary of State Bill Galvin, whose office sent a formal request to Robinhood for more details. His main concern is that the platform may be mixing betting with investing, which could affect younger users in particular.

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

He also criticized the idea of "linking a gambling event on a popular sports event that’s especially popular to young people to a brokerage account".

The prediction markets became available on Robinhood’s app on March 17. They are offered through Kalshi, a platform approved by the Commodity Futures Trading Commission (CFTC).

Users can trade event contracts, tools that let people place trades based on how real-world events turn out, based on college basketball results and upcoming decisions like the May federal interest rate.

However, some regulators believe these products are too close to gambling and could be risky for retail users.

On March 7, Robinhood agreed to a $29.75 million settlement with the Financial Industry Regulatory Authority (FINRA). What happened? Read the full story.