Robinhood Drops Sports Contracts in Michigan

Prediction market exchange Robinhood has dropped sports event contracts from its platform in Michigan, the MGCB has announced.

The Michigan Gaming Control Board (MGCB) said this week that Robinhood had agreed to stop accepting sports-related trading in the Great Lake State.

The agreement between the MGCB and Robinhood Derivatives LLC comes amidst ongoing legal battles in the state between prediction markets and regulators.

Michigan has regulated online sports betting and has persistently threatened platforms who don’t fall into line with legal action.

MGCB: ‘Another Win for Michigan Consumers’

In a statement released Wednesday, the MGCB’s Henry Williams said that sports wagering should only be offered by “licensed, regulated” platforms.

“We’re pleased,” he added, “Robinhood has agreed to step back from offering these unregulated products while the courts continue to sort out the broader legal questions.”

The “broader legal questions” have been asked all year by states like Michigan and Connecticut, who have established regulated betting industries.

Prediction Markets vs Regulated Sports Betting

Legalized sports betting has been around for a few years. Individual states can issue licenses to operators, with customers able to access platforms from within state lines.

However, the proliferation of prediction markets has created a legal quagmire. Markets like Kalshi and Robinhood are regulated by the Commodity Futures Trading Commission (CFTC) and aren’t subject to state regulation.

The prediction markets argue they offer sports contracts under derivatives law. However, state regulators are crying foul, saying they effectively amount to unregulated sports betting.

Move Follows Kalshi Ban in MI

The move against Robinhood is the latest blow landed by Michigan on prediction markets.

Last week, Attorney General Dana Nessel temporarily banned Kalshi from offering sports contracts to state residents.

The AG accused Kalshi of offering sports wagering “under the guise of trading event contracts”. The fight had been ongoing since March, when Nessel filed a lawsuit against Kalshi for violating the Lawful Sports Act.

The start of football season was always going to be a testing time for state regulators keen to protect their betting industries.

Licensed sports betting platforms are slowly losing ground to federally regulated prediction markets. Many of them have been busy gearing up for the NFL season with big advertising campaigns. The most recent is Novig, who used Hollywood star Sydney Sweeney to promote its sports event contracts.

MI Move Cushioned by Rothera Launch

The timing of the Michigan move couldn’t be worse for Robinhood. The withdrawal of sports event contracts from its Michigan platform comes as the new NFL season starts.

Robinhood stock rose last week before a ball was kicked in the NFL. Robinhood and Susquehanna launched Rothera back in June, a CFTC-regulated exchange offering football contracts. That was fundamental in Robinhood’s near-16% share price jump on Wall Street.

Though Robinhood suffered a setback in Michigan, its swift agreement to stop sports contracts there was tempered by the Rothera move. Where one state clamps down on sports markets, another appears.