Robinhood has emulated the likes of Crypto.com by launching a ‘sports events contract’ product, in a move which will likely drive further discussion around the blurring of lines between betting and financial services.
The online marketplace announced the products yesterday, timing the launch before the Super Bowl, the final game of the US National Football League (NFL), between the Philadelphia Eagles and Kansas City Chiefs on Sunday 9 February.
For all intents and purposes, event contracts essentially function as bets. Customers purchase a ‘contract’ stipulating that a certain event will occur, such as the Eagles winning the Super Bowl or Donald Trump winning the 2024 presidential election.
Due to the potential for buyers to either gain or lose money, there has been an extensive debate around whether event contracts constitute gambling or not. Robinhood seems adamant that the product is just another extension of its financial services offering, sitting alongside stocks, shares and crypto trading.
Interestingly, Robinhood’s sports event contract has been made available via a partnership with Kalshi. The latter is the leading provider of political event contracts in the US, and has found itself at the centre of regulatory debates around the products.
“Robinhood’s mission is to democratise finance for all,” a company statement read.
“With an emerging asset class like event contracts, we recognise an opportunity to better serve our customers as their interests converge across the markets, news, sports, and entertainment.
“Available in all 50 states through KalshiEX LLC, a regulated exchange, the Pro Football Championship event contract gives eligible customers the power to trade on the outcome of the big game.”
Contracts and the CFTC
Robinhood’s launch comes at a more ideal time than others not just because of the forthcoming Super Bowl this weekend but also because of a recent change in leadership at the Commodity Futures Trading Commission (CFTC).
The CFTC has historically been opposed to event contracts, arguing that the products could cross the line from financial services to gambling due to the reasons outlined above.
This has seen the regulator ask Crypto.com to pause its sports event contracts just a couple of weeks after the product launched, while it has also been engaged in extensive discussions with Kalshi, which as noted above is the biggest provider of political event contracts.
Political event contracts themselves are another issue of contention due to US bookmakers being prohibited from taking bets on political events like presidential or general elections. It has been argued that financial services firms offering these products effectively allow bettors to bypass these restrictions.
The new acting leadership of the CFTC, appointed by newly inaugurated President Trump, seems more receptive to event contracts as a financial services product than previous governance, however. Robinhood, Kalshi and others may be in luck and the products could be here to stay, though they will likely remain controversial.