Closer look at Robinhood's Sports Prediction Markets

Key Points: 

• Robinhood now allows users to trade sports-based contracts via “prediction markets” that many argue are a form of unregulated sports betting, as profits depend on a user’s ability to correctly predict the outcomes of sporting events. 

• Robinhood’s sports prediction markets are available in all 50 states, despite only 38 states having legalized sports betting. 

• Robinhood offers these through a partnership with Kalshi, which last year was successful in its defense of a legal challenge around political election-based prediction markets.

• There have already been legal actions in Nevada, Massachusetts and New Jersey focused on these new sports prediction offerings by Kalshi and Robinhood.

• Sports prediction markets and sports betting both involve risking real money, with profits or losses dependent on the success of the predictions on sports results.

• Kalshi added Donald Trump Jr. as a “strategic advisor” in January.

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​Robinhood, known for commission-free stock trading, ETFs, options and cryptocurrency, has recently ventured into the space of sports prediction markets, which many argue are simply another name for sports betting. In essence, Robinhood has partnered with a company called Kalshi to capitalize on the concept of “sports event trading.” 

The partner, Kalshi, is an exchange that is currently regulated by the Commodity Futures Trading Commission (CFTC) after an initial legal challenge last year around election-focused prediction markets. Now, they’ve taken their offering a step further by offering event-based market options for sporting events. Robinhood now offers users the opportunity to buy and sell “event contracts” related to sports outcomes, notably March Madness games, meaning the NCAA Men's and Women's Basketball Tournaments. 

Kalshi users - largely through Robinhood - generated nearly $250 million worth of “contracts” through the first two rounds of NCAA tournament play.

This move has sparked interest and controversy, especially considering Robinhood attempted and failed to offer sports-based event contracts for the Super Bowl back in February, upon receiving a request from the CFTC a day after their original announcement. With people in all 50 states having access to trading contracts connected to college basketball results through Robinhood, despite sports betting being legal in just 38 of those states, questions are being raised about the legality of these markets and potential implications.​

Does Robinhood now offer sports betting?

Robinhood's introduction of sports prediction markets allows users to trade contracts based on the outcomes of sporting events. “Buy” your prediction contracts, and profit when they are right.

Robinhood, which boasts 25 millions users (dwarfing FanDuel’s 4.5 million), maintains that these offerings are distinct from traditional sports betting. According to JB Mackenzie, VP & GM of Futures and International at Robinhood, "We believe in the power of prediction markets and think they play an important role at the intersection of news, economics, politics, sports, and culture." 

Unlike conventional sportsbooks where bettors wager against the house, Robinhood's model enables users to trade under the free market dynamics of trading. This peer-to-peer structure is facilitated through their partnership with Kalshi, which is, in part, an attempt to meet compliance with existing financial regulations.

Robinhood's Partnership with Kalshi

Kalshi is a CFTC-regulated exchange specializing in event contracts, allowing users to speculate on the outcomes of various events, including politics, pop culture and sports. By collaborating with Kalshi, Robinhood integrates these event contracts into its platform, providing users with a novel way to engage with sports events like March Madness. This partnership aims to combine Robinhood's user-friendly interface and massive base of active users with Kalshi's regulatory compliance to offer a unique trading experience.

Where are Robinhood’s sports prediction markets available?

Robinhood's sports prediction markets are accessible nationwide through the app's "Prediction Markets" hub. This feature is integrated into the main page, providing users with immediate access upon opening the app. By leveraging Kalshi's platform, Robinhood currently offers these markets across the United States, irrespective of individual state regulations concerning sports betting.​ 

How can they offer sports prediction markets in states without legalized sports betting?

The legality of Robinhood's sports prediction markets in states without legalized sports betting hinges on the classification of these event contracts. Since they are offered through a CFTC-regulated exchange and framed as trading instruments rather than traditional gambling, Robinhood and Kalshi argue that they do not constitute sports betting. 

This distinction allows them to operate in jurisdictions where sports betting remains illegal. However, this approach has attracted regulatory scrutiny. In addition to legal action in Nevada against Kalshi, Massachusetts Secretary of State Bill Galvin has initiated an investigation into Robinhood's offering, expressing concern about linking gambling events to brokerage accounts. ​

The concern is that this sports betting-like offering is simply a way to offer sports gambling more widely outside of existing regulatory frameworks. Galvin’s office issued a subpoena to Robinhood seeking information related to how many of its brokerage account users in the state have requested to trade college sports events contracts. 

UPDATE - March 28, 2025:

New Jersey's Department of Gaming Enforcement sent Kalshi and Robinhood cease-and-desist letters on Thursday, March 27. In response, Robinhood (but not Kalshi) restricted users in New Jersey from its March Madness betting options.

Then on Friday night, Kalshi filed lawsuits in both Nevada, where they had also received a cease-and-desist letter, and New Jersey. The company also provided a statement to industry reporter Dustin Gouker from CEO Tarek Mansour on Saturday morning:

“We have been targeted before, we have fought before, and we have won before. This time will be no different. The threatened actions in Nevada and New Jersey seek to undermine not just Kalshi’s contracts, but the authority granted by Congress to the Commodity Futures Trading Commission, which has safely and effectively governed commodities markets for decades. Prediction markets are a critical innovation of the 21st century, and like all innovations, they are initially misunderstood. We are proud to be the company that has pioneered this technology and stand ready to defend it once again in a court of law.”

UPDATE - March 31, 2025:

The Ohio Casino Control Commission has also now sent out cease-and-desist notices. The OCCC action has targeted three operators — Kalshi, Robinhood and Crypto.com — stating that they are not operating legally in the state for the sports event markets.

In a press release, the OCCC said in part: "The Commission determined the event contracts offered by the companies on sporting events meet the definition of sports gaming under the law, which requires licensure to be legally offered in Ohio… Purchasing a contract based on which team a person thinks will win a sporting event is no different than placing a bet through a traditional sportsbook,” said Ohio Casino Control Commission Executive Director Matthew Schuler. “The only difference is that these event contracts do not have the consumer protections required under Ohio law and are accessible to Ohioans under 21 years of age. The Commission must take action to fulfill its statutory responsibilities and ensure the integrity of sports gaming in Ohio.”

Kalshi again responded quickly, sharing another statement with Dustin Gouker: "The threatened actions in Ohio seek to undermine not just Kalshi’s contracts, but the authority granted by Congress to the Commodity Futures Trading Commission, which has safely and effectively governed commodities markets for decades. Prediction markets are a critical innovation of the 21st century, and like all innovations, they are initially misunderstood. We are proud to be the company that has pioneered this technology and stand ready to defend it once again in a court of law."

Kalshi, Robinhood and Crypto.com have been given until April 14 to comply with the new OCCC order.

UPDATE - April 2, 2025:

Connecticut has also now opened an investigation into Kalshi. Per Covers, “The gaming division of the Connecticut Department of Consumer Protection has opened an investigation into Kalshi, adding to the list of states that are taking a closer look at the federally regulated prediction market’s products.”

Additionally, Daniel Wallach reported that CFTC Acting Chair Caroline Pham stated that the CFTC “should exercise caution” when it comes to gaming-related ‘event contracts’ because state regulation of gaming “is clearly a power reserved to the states” and it is “essential” that the CFTC not “encroach upon” those “prerogatives.”

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The Illinois Gaming Board is the latest state agency to send cease-and-desist letters to Kalshi, Robinhood, and Crypto.com, alleging violations of the state's "Sports Wagering Act."

UPDATE - April 7, 2025:

The Maryland Lottery and Gaming Control Commission (MLGCC) has announced that it sent cease-and-desist letters to Kalshi, Robinhood and Crypto.com. Announcing the move, the MLGCC wrote:

Maryland Lottery and Gaming informed the three companies that the sports event prediction markets they offer via their online platforms are indistinguishable from sports wagering because they are based on the outcomes of sporting events. The existence of these markets circumvents Maryland law, which defines sports wagering and permits it to be offered only by licensed operators. The law additionally requires customer age and identity verification to confirm that sports wagering participants are at least 21, as well as geolocation to confirm that participants are physically located in Maryland when they place a wager. Commodity traders do not operate under these requirements.

“We view this as a legal matter and a consumer protection matter, and there is also a fiscal interest for the State,” said Maryland Lottery and Gaming Director John Martin. “Each of Maryland’s legal sports wagering operators completed a rigorous licensing process and is subject to extensive regulations that include responsible gaming requirements. The commodity traders aren’t bound by those same guardrails. They’re conducting sports wagering without a license, and in doing so, they’re avoiding the collection of sports wagering taxes that legal operators pay to the State.”

So now FIVE states — Nevada, New Jersey, Ohio, Illinois and Maryland — that have issued cease-and-desist notices, while Massachusetts and Connecticut have opened investigations.

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How are sports prediction markets different from sports betting?

While both involve speculating on sports outcomes, Robinhood has stated that prediction markets operate under financial regulations governed by agencies like the CFTC, whereas sports betting is regulated by state gaming commissions.​ Robinhood also points to the market structure: prediction markets facilitate peer-to-peer trading of event contracts. In contrast, traditional sports betting involves placing wagers against the house.​ 

Robinhood also claims prediction markets fall under the umbrella of Purpose and Use cases – prediction markets are often utilized for hedging and information aggregation, providing insights into public sentiment on various events. Whereas sports betting primarily serves as a form of entertainment and gambling.

The definition of “sports betting” has been closely scrutinized in recent years, in particular around the legality of Daily Fantasy Sports (DFS) products that resemble player prop parlays, sweepstakes-based betting that has a “no purchase necessary” dual-currency system, and now with these sports prediction markets. 

Some have said that the nature of sports betting boils down to three simple questions: 

• Can users risk real money? 

• Does the profit or loss of that money depend on their sports predictions being correct? 

• Can users win real money and withdraw profits from their sports-based predictions? 

The answer to all three of these questions is “yes” with Robinhood’s sports prediction markets, and therefore many would argue that it is a form of sports betting. But at least for now, Kalshi and Robinhood’s offerings are live and operating in states that haven’t legalized sports betting. 

And with more regulatory scrutiny likely coming, it’s worth noting that in January, Kalshi added Donald Trump Jr. as a “strategic advisor.” Then in February, President Trump nominated Kalshi board member Brian Quintenz to become the new chairman of the CFTC, which for now is led by “Acting Chairman” Caroline Pham. Quintenz previously served as commissioner of the CFTC from 2017 to 2021.

Do Robinhood and Kalshi follow standard Responsible Gaming guidelines?

Robinhood's framing of sports prediction markets as trading activities rather than gambling has implications for responsible gaming practices. Traditional sportsbooks implement responsible gaming measures, including self-limiting tools, self-exclusion options and resources for problem gambling. As of now, Robinhood has not explicitly adopted standard responsible gaming guidelines for its prediction markets, possibly due to its classification of these activities as trading rather than gambling. 

Meanwhile, Kalshi CEO Tarek Mansour announced this week the platform is debuting a “Consumer Protection Hub” that will include “features like deposit caps, trading breaks and voluntary opt-outs”. These features, he said, will work in tandem with Kalshi’s “market surveillance team” and regulatory systems.

The term “responsible gaming” is not in the announcement, but the features are essentially identical to those offered by regulated sportsbooks. All major operators currently offer deposit and time limits as well as self-exclusion tools. Mansour also announced that Kalshi is partnering with integrity monitoring service IC360 for its sports contracts. IC360’s data will enhance Kalshi’s “ability to prevent bad actors” and report them to sports leagues and regulators.

Addiction treatment for compulsive gambling, sports betting and day trading

Engaging in activities that involve risking money for potential financial gain – in particular gambling, sports betting and day trading – can lead to compulsive, dangerous behaviors. All three share the allure of monetary rewards, the thrill of risk-taking and the potential for significant losses. 

Birches Health offers specialized care virtually, from the comfort of home, with counselors who are certified in treating the complex aspects of these types of addiction. To get started with Birches or learn more you can: 

• Book an appointment 

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