Electronic trading platform provider Robinhood (HOOD) is facing scrutiny from Massachusetts’ top securities regulator over its recently launched prediction markets hub, Reuters reported. This feature allows users to bet on the outcomes of various political events or sports games, such as March Madness college basketball tournaments.
The probe focuses on concerns about the platform’s potential to link gambling-like activities to brokerage accounts, particularly targeting younger users.
It is worth noting that the investigation comes after Robinhood delayed its prediction markets launch in February at the request of the CFTC. Some critics say these platforms might bypass state gambling laws, which could weaken protections for users.
Regulator Demands Details on Robinhood’s Sports Contracts
The regulator has issued a subpoena to Robinhood seeking details about Massachusetts residents who traded contracts tied to college sports. It also demanded copies of HOOD’s marketing materials and emails about the hub’s launch.
In its defense, Robinhood stated that event contracts are regulated by the Commodity Futures Trading Commission (CFTC). The company also said it offers these contracts in partnership with Kalshi, a platform overseen by the CFTC.
Further, HOOD claims its prediction markets are safe, well-regulated, and in high demand by both individual and professional investors.
Top Morgan Stanley Analyst Bullish on HOOD Stock
A Top analyst from Morgan Stanley (MS), Michael Cyprys, reiterated a Buy rating on Robinhood stock yesterday with a price target of $90 (86.1% upside potential).
Cyprys expects the company to launch an investment advice solution, with a managed account offering and a referral program for registered investment advisors (RIA) at Robinhood’s Gold Summit on March 26. This is likely to boost growth and investor confidence.
The event is also expected to disclose improvements in customer deposits and asset transfers. Overall, the analyst expects this event to be a key catalyst for the stock.
Is HOOD Stock a Good Buy?
Turning to Wall Street, HOOD stock has a Moderate Buy consensus rating based on 14 Buys and five Holds assigned in the last three months. At $70.94, the average Robinhood price target implies a 46.7% upside potential.
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