The Commodity Futures Trading Commission (CFTC) has formally requested that Robinhood halt the rollout of sports event contracts just a day after the launch.
Fintech behemoth Robinhood announced a partnership with Kalshi, a regulated prediction market, to allow its users to take event contracts out on the upcoming Super Bowl LIX.
The collaboration between the two companies would have enabled Robinhood Derivatives account users with margin investing to wager on the outcome of the Kansas City Chiefs versus Philadelphia Eagles match at America’s most significant sporting occasion.
The move from the CFTC appears to have surprised Robinhood, which said in a release, “We are disappointed by this outcome, especially given that we had been in regular communication with the CFTC about our intent and plans to offer this product.”
The company added, “We’ve also taken steps to advocate for balanced regulation in the futures and derivatives markets, including participating directly in a CFTC roundtable, providing written feedback to the CFTC, and generally championing the economic benefits of event contracts.”
In the statement, Robinhood explained that it had only rolled the product out to roughly 1% of its customer base, and those who have already placed trades on the market can either close their positions or resolve them.
Lucas Moskowitz, Robinhood’s General Counsel, told Reuters, “We are heeding their directive to cease offering these contracts despite the fact that the CFTC has not deemed Kalshi’s football championship contracts illegal.”
Upon launching the contracts, the company said, “Robinhood’s mission is democratizing finance for all. With an emerging asset class like event contracts, we recognize an opportunity to better serve our customers as their interests coverage across the markets, news, sports, and entertainment.”
Will Sport Event Contracts Survive Regulatory Scrutiny?
Event contracts have gained significant traction in recent months after the Commodity Futures Trading Commission’s attempt to block Kalshi’s election betting contracts was struck down in court.
Kalshi was approved to offer sports events contracts to users across the United States of America.
The volume traded on the Super Bowl winner contracts is significantly less than the traction gained through being the exclusive place to wager on the election outcome. This suggests that users where online sports betting has been legalized are happy to use traditional sportsbooks.
Robinhood has reiterated its desire to launch a comprehensive events market product in the future. The website reads, “We continue to champion the economic benefits of event contracts, highlighting their role in expanding access and enabling real-time decision-making for retail customers.”
The blurring between event contracts and sports betting continues, and industry analysts predict seismic shifts in regulation soon.
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