Massachusetts securities regulators have opened an investigation into Robinhood’s recent move to offer prediction markets tied to major sports events, including the NCAA’s March Madness tournaments. 

The probe reflects growing concerns about the intersection of gambling and investing, especially when targeted at younger demographics.

Massachusetts Secretary of State Bill Galvin confirmed in an interview with Reuters that his office issued a subpoena to Robinhood last week. 

The request seeks information on how many brokerage users in the state opted to engage in college sports event contracts, as well as internal communications and marketing materials related to the product’s rollout.

Galvin criticized the move as an attempt to blend gambling with investing, stating it was “just another gimmick from a company that's very good at gimmicks to lure investors away from sound investing.” His concerns focus particularly on the appeal such features may have among younger investors during a highly popular college sports season.

Robinhood’s new feature allows users to trade “event contracts” — financial products that let individuals bet on the outcome of real-world events. These contracts have gained traction in recent years and are seen by supporters as a novel way to engage with markets. However, critics argue they closely resemble gambling, raising regulatory red flags.

The prediction markets are being offered via KalshiEX, a CFTC-registered platform, and are regulated by the US Commodity Futures Trading Commission. A Robinhood spokesperson said the contracts are legally compliant and part of a broader trend toward integrating prediction markets into retail trading platforms.

"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 spokesperson said.

Robinhood had previously launched a similar offering tied to the Super Bowl in February but withdrew it within a day following a request from the CFTC. 

The March Madness launch, however, went forward after the agency stated it had no legal basis to block access to the contracts.

The subpoena also seeks details about Robinhood's decision to move ahead with college sports betting despite the earlier intervention by the CFTC. Galvin’s office is investigating whether the firm adequately considered the regulatory concerns raised during the Super Bowl incident.

This isn’t the first time Robinhood has faced scrutiny from Massachusetts regulators. In 2020, Galvin’s office accused the company of using gamification tactics — like animated confetti — to encourage risky trading behavior among inexperienced investors. That case was resolved in 2024 when Robinhood agreed to pay $7.5 million in penalties, including for a separate investigation into a 2021 data breach.