Robinhood suspends launch of Super Bowl wagering contracts following CFTC inquiry

Robinhood pauses launch of Super Bowl wagering contracts following CFTC inquiry

U.S. Commodity Futures Trading Commission intervention mandates Robinhood retracts event contracts on February 4 (Reuters), one day after Robinhood launched the products allowing users to bet on the outcome of Super Bowl matches over the weekend.

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Updated February 05

"We are following the directive to cease these contracts, although the CFTC has not declared Kalshi's football championship contracts illegal," Lucas Moskowitz, Robinhood General Counsel, stated with regret regarding the situation.

There was no immediate response from Kalshi's representatives when impromptu at the request of Reuters.

These contracts were attracting bettors out of concern for one of America's most famous sports events as Robinhood tries to diversify into trending sectors favored by retail investors.

Through e-mail, a CFTC spokesperson said that the Commission has significant concerns about FCMs offering any contract to its clients that may not meet standards of legality and intends to exercise all supervisory powers necessary. With regard to customer protection, FCMs are under strict duties and obligations adopted by the CFTC and must uphold the highest standards to safeguard the public."

Initially, it was available to only 1% of the Robinhood clientele. Those customers who traded in these contracts will be allowed to either close their positions or let them settle, stated Robinhood.

Event derivatives trading involves buying and selling contracts that allow traders to speculate on various events, including elections, economic data announcements, or major policy decisions.

Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors, remarked, "Prediction markets and event contracts are often too complicated to navigate through regulatory environments. The CFTC would be sensitive that this could seem like a retail betting platform disguised as an investment, especially since sporting events happen far more often than presidential elections."

Although somewhat novel and thought to be speculative, there is a demand for these products, mainly since the U.S. court overturned the CFTC's actions to interfere with KalshiEX's election-wagering contracts.

The upcoming event contracts will enable a much more extensive launch later in 2023, according to Robinhood's derivatives team.