Robinhood Decides to Pause Sports Prediction Markets in New Jersey

Robinhood is already scaling back their new sports prediction markets.

The trading platform has announced that it has paused its March Madness prediction market in New Jersey. The move comes after the state sent Robinhood a cease-and-desist request over concerns that these markets qualify as gambling. If they do, that means the operators should be subject to the regulations and taxes of the sports betting industry.

“Event contracts offered by Robinhood Derivatives are federally regulated by the CFTC and offered through CFTC-registered entities, assuring that retail customers can access these prediction markets in a safe and regulated manner,” a Robinhood spokesperson said of the decision. “While we do not believe these contracts run afoul of any state laws, we are no longer allowing New Jersey residents to enter new positions for the Men’s and Women’s Basketball Tournament event contracts.”

The New Jersey Division of Gaming Enforcement was behind the letter. The department runs the state's sports betting industry, so they have the talent lead against Robinhood’s controversial prediction market.

With March Madness ending next Monday, the market will be unlikely to go live again this season. 

Battle Royale Forming Over Prediction Markets

New Jersey isn’t the first state to go after controversial sports prediction markets. Massachusetts has also taken legal action against Robinhood as they investigate the industry's legality.

While many states reject these prediction markets, it may not be up to them. The White House and the Commodity Futures Trading Commission (CFTC) have strongly supported the new industry. The CFTC even consulted with Robinhood when it launched the March Madness market, showing the regulators' acceptance of sports prediction markets.

Responsible gaming advocates have also sounded the alarm over prediction markets. They believe this gives those struggling with gambling addiction a way to circumvent a sports betting ban. It also has users wagering using investment portfolios, which can put them at significant risk for financial dangers. 

The states and Robinhood may be the two sides currently battling, but this debate will soon escalate as we determine if the industry should be considered gambling.