The Massachusetts Secretary of State, Bill Galvin, has confirmed on Monday that the Bay State has launched an investigation into Robinhood and the platform’s newly-launched prediction markets, which have already generated significant interest and trading handle.

Massachusetts on the Offensive Against Robinhood’s NCAA Prediction Markets

With $249 million generated in trading volume in the first two rounds of the NCAA men’s college basketball tournament, Massachusetts is looking into the legality of the offer in the first places.

Other regulators, however, including the Commodity Futures Trading Commission (CFTC), have ultimately not shut down the sector’s main platforms, and the outlook is not that they would.

Galvin has not minced his words about what Robinhood and Kalshi were doing, with the regulator saying in an interview for Reuters on Monday that he has grown accustomed to “gimmicks” such as the ones put forward by the two companies.

“This is just another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing.”

Galvin confirmed that his office sent Robinhood a subpoena last week to find out how many of the platform’s brokerage account users have also opted into trading college sports events contracts on March Madness.

Robinhood has issued a statement as cited by Reuters, in which it argued that all of its events contracts were in fact regulated by the CFTC and followed the law to the letter.

“Prediction markets have become increasingly relevant for retail and institutional investors alike, and we’re proud to be one of the first platforms to offer these products to retail customers in a safe and regulated manner,” the company said.

The mainstream sports betting industry has criticized Robinhood and Kalshi, and prediction markets in general, arguing that they were another form of unregulated gambling.

Legitimate Products Causing a Lot of Regulatory Pushback

However, some major industry players have already sought entry into the vertical, with DraftKings applying for a permit to launch its markets.

Robinhood and partner Kalshi have been able to generate significant interest and have insisted that their offers do not constitute gambling as they simply allow consumers to stipulate about the outcome of an event, with the most recent addition of sport following the launch of entertainment and political markets by Kalshi.

Kalshi has been able to offer both while demonstrating that its product was a legitimate offer and did not breach any gambling laws.