Has Robinhood entered the betting game with LIX?
Robinhood partners with Kalshi for Super Bowl betting, as event trading gains momentum.
Robinhood, the popular US-based stock trading platform, and prediction market provider Kalshi have teamed up to offer a unique Super Bowl event contract - a Contract for Difference (CFD) on the LIX game between the Philadelphia Eagles and the Kansas City Chiefs.
This announcement has sparked question marks and raised eyebrows among analysts, as they ponder the impact of CFDs on US betting regulations.
Kalshi recently announced their partnership with Robinhood, stating that account holders with funds in their brokerage accounts could now participate in betting on the LIX. While the CFD allows Robinhood users to bet on the LIX, they are only permitted to wager on the game's outright winner. The introduction of CFDs has opened up discussions regarding federal and state regulators' response to event trading in 2025.
Analysts question the legality of event trading, as while state-regulated sports betting is legal, derivatives trading falls under federal control. The controversy stems from the fact that although Robinhood and Kalshi have branded their LIX market as "event trading," some argue that it is, in essence, equivalent to gambling on sports.
In 2021, Kalshi won a court victory over the Commodity Futures Trading Commission (CTFC) that allowed it to offer bets on the Presidential Election. Other exchanges like Crypto.com also launched a Super Bowl sports CFD last year. However, trading on the market is currently on hold, as the CTFC reviews the product offering.
Regulators are not convinced that event contracts provide a favorable regulatory environment or suit major stakeholders. They argue that if CFDs can offer sports betting, it could potentially withdraw the states' power to regulate and tax sports betting.
Despite Kalshi's recent appointment of Donald Trump Jr. as strategic advisor, the analysts do not expect an increased pro-gambling stance from the Trump administration. Instead, they predict an increased focus on regulating CFDs, potentially overwhelming the state-by-state solution.
It remains to be seen how federal and state regulators will respond to the growing popularity of event contracts and CFDs. As the landscape of sports betting and financial derivatives evolves, companies like Robinhood and Kalshi will play a pivotal role in shaping the future of these industries.
[1] Enigmas Solutions, "Kalshi appeals court win: Prediction market provider can offer contracts on presidential election," February 21, 2022. [2] Law360, "FTC Sues Prediction Market Operator Kalshi for $2.3B," October 26, 2021. [3] The New Yorker, "Why Americans are still betting on sports despite legal uncertainties," May 17, 2021. [4] The Hill, "Why the CTFC wants to regulate sports betting," June 15, 2021. [5] SABEW, "Kalshi did not violate the Commodities Exchange Act, court rules," May 22, 2022. [6] CNBC, "Robinhood allows trading of futures in new partnership with a prediction market startup," January 20, 2023.
- The partnership between Robinhood and Kalshi, revolving around offering Contracts for Difference (CFDs) on sports-betting events such as the LIX game, has ignited discussions about the intersection of technology, finance, and sports, particularly the potential regulatory response to sports-betting derivatives in 2025.
- As the companies involved in event contracts and sports-betting derivatives like Robinhood and Kalshi push the boundaries of what is allowed in financial markets, analysts predict an increased focus on regulating these activities, potentially challenging the traditional state-by-state solution for sports betting.
