Robinhood to Offer Sports Event Contracts Nationwide, Could Pave The Way For Crypto 

Robinhood has announced the launch of a prediction markets hub that will offer events contracts on economics, politics, culture, and, notably, sports.

The prediction markets hub, and corresponding contracts will be available through a partnership with Kalshi. It has been reported that those who use the prediction markets hub on Robinhood will pay a fee of two cents per contract, with Robinhood and Kalshi taking 50 percent each.

JB Mackenzie, VP & GM of Futures and International at Robinhood said in a statement: “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.”

“We’re excited to offer our customers a new way to participate in prediction markets and look forward to doing so in compliance with existing regulations,” Mackenzie continued.

The hub will launch before March Madness, and Robinhood intends to offer markets on the men’s and women’s tournaments. This will effectively mean that residents in all 50 states will be able to legally wager on college sports in the United States.

The listed company released a memo addressing prediction markets and vehemently believes that they can play a pivotal part in the overall ecosystem. “Unlike sports gambling, in which there is a “House” and oddsmakers, sports events contracts are binary products traded directly between buyers and sellers in open, transparent, two-sided markets on federally regulated exchanges.”

It adds: “Various commercial entities, including team sponsors, media outlets, and vendors, can use sports event contracts to manage risks related to team performance. For example, team sponsors could hedge their risk of a team having a losing season. Consumer-focused businesses near a sports stadium may want to hedge the possibility of cancellation or lower attendance that would impact their revenue for the day.”

CFTC, MLB, and the Battle Over Federally Regulated Sports Contracts

Although Robinhood’s statements are not theoretically incorrect, they fail to take into account potential integrity risks and market manipulation that could arise. Major League Baseball weighed in recently to the Commodity Futures Trading Commission’s ‘call for evidence’ surrounding sports events contracts.

The letter from the MLB rulemakers asserted: “MLB has supported legal sports betting at the state level based on robust regulation and relationships in which sports leagues are viewed as partners and integrity of competition is considered paramount. If the CFTC decides to permit sports event contracts, this same integrity framework should be applied.”

It also suggests that safeguarding protections are currently sorely lacking, and brokers do not have to notify the league of any potential threats to integrity. It also adds that “MLB has been advised that some exchanges and brokers take the position that they are not even permitted to share information with MLB under current CFTC regulations.”

Could Robinhood’s Prediction Markets Be the Gateway for Crypto Sportsbooks?

Robinhood has previously announced the launch of sports events contracts, also in partnership with Kalshi. However, the CFTC asked them to suspend all markets almost immediately. The company suggests it has been in close discussion with the regulator since. It evidently now feels comfortable enough with the regulatory position that it can launch markets again and capitalize on one of America’s largest sporting and betting events.

The partnership could be pivotal in paving the way for crypto sportsbooks. Robinhood has clear crypto functionality, given the company’s history with digital currencies. Details of how users will be able to deposit are currently unclear, but if users can deposit cryptocurrency into a central wallet and use it on sports event contracts, it would mark the first legalized crypto sports wagering in the United States of America.