Robinhood Blocks Some Prediction Markets Over Insider Trading Worries

Insider trading concerns have caused Robinhood to bar some prediction markets from its platform.

Jordan Sinclair, president of Robinhood UK, told the Financial Times (FT) Sunday (April 12) that the FinTech was “very focused on market abuse, insider trading.”

“We don’t necessarily offer all prediction markets or all event contracts. There are some we’ve chosen aren’t right for our customers and that is, I think, the way you can kind of navigate that world,” he added.

As the FT noted, suspiciously well-timed bets on prediction markets have led to fears that insiders could be using privileged information, enjoying an unfair advantage over other users and presenting a threat to the security of sensitive information.

For example, the U.S. attack on Iran in February was preceded by several “unusually large and well-timed” wagers on Polymarket, the report added. Israeli authorities in February charged two people with using classified information to bet on military operations on the platform.

Sinclair pointed to so-called mention markets as a particular variety of event contract that Robinhood did not offer “for exactly some of those concerns.”

Mention markets are popular on both Polymarket and Kalshi, and involve traders placing bets on the words that will be used during events or speeches, like an earnings call, the FT said.

The report noted that Robinhood teamed with Kalshi to offer prediction markets last year, a move expected to generate $300 million in yearly revenue. Robinhood has a smaller deal with rival ForecastEx but does not work with Polymarket, Kalshi’s chief competitor.

The news follows a recent analysis by Bank of America showing that the annual volume of U.S. sports-related event contracts could grow to $1.1 trillion and that this activity could generate $10 billion in annualized revenue for prediction market platforms. That figure would be up from the $100 billion in event contract volume that is projected for this year.

The bank found that there are three main drivers of the growth of prediction markets: federal regulation that permits sports-related event contracts in all 50 states, accessibility to customers as young as 18 and gamblers who might be banned by sportsbooks, and an avoidance of state gaming taxes that gives prediction markets an edge over online sportsbooks.

“At the same time, prediction markets have become a flashpoint between federal and state regulators,” PYMNTS wrote last week.

“While real-money prediction markets technically fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), a growing number of states have sought to shut down the markets they view as unlicensed or illegal gambling operations.”

The CFTC earlier this month filed separate lawsuits against Arizona, Connecticut and Illinois, saying the states have taken measures that encroach on the federal regulator’s exclusive jurisdiction over prediction markets.