Thanks to a strategic partnership with prediction market company Kalshi, Robinhood has entered the sports gambling sphere. Users can now trade event contracts on its platform, such as what rate the Federal Reserve will set in May or who will win this year's March Madness and everything in between.
The news creates a massive shift in the sports gambling industry by usurping the previous kings of sports betting in the US and questioning who is supposed to regulate sports gambling in a post-PASPA world.
New Kings On The Block
With Robinhood stepping into the sports gambling world they're the new Kings on the block. With over 25 million users they tower over previous sports betting royalty DaftKings (4.8 million users) and FanDuel (4.5 million users).
That massive user base is thanks to the different rules each has to contend with. While DraftKings and FanDuel are regulated at the state level which has so far barred them from entering lucrative markets like California and Texas, Robinhood (and partner Kalshi) doesn't have those restrictions.
As a financial service company, Robinhood's platform bypasses state-level regulation and plays on the federal level. The same is true for Kalshi which is a CFTC-regulated exchange platform. That allows Robinhood to reach customers in 50 states compared to the 39 states (plus D.C. and Puerto Rico) where sportsbooks are allowed to operate.
Those different playing fields are a huge concern for books and the AGA with President and CEO Bill Miller stating: "We are planning to submit formal comments [to the CFTC] and be part of the town hall period where we can weigh in. We look at sports betting that has been built up over the past several years with 5,000 regulators and significant tax revenue that goes to the states and the tribal nations. We are more than a little concerned that this could be washed away by some federal agency."
Changing The Game
The CFTC has yet to decide on an official stance on prediction markets but current acting chair Caroline Pham has called for a public roundtable on such markets.
A CFTC press release from February 5th states that the goal for this roundtable is: "to develop a robust administrative record with studies, data, expert reports, and public input from a wide variety of stakeholder groups to inform the Commission’s approach to regulation and oversight of prediction markets, including sports-related event contracts."
President Donald Trump has nominated Brian Quintenz to head the CFTC (who should step into his role by the summer of 2025). Quintenz is currently on the board of Kalshi, so it's easy to see him as favorable to prediction markets' continued existence and proliferation.
With access to every US market, prediction markets present an existential threat to sportsbooks, specifically with one as large as Robinhood stepping into the ring. Allowing them to continue operating as is would inevitably push sportsbooks to lobby the government to move sports gambling from a state issue to a federal issue. There's no clear indication that the government is ready to step in yet.
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