Since early 2025, a quiet shift has been reshaping both the sports betting and financial trading landscapes. Firms like Robinhood, better known for zero commission stock trades, launched sports event contracts. These are a new class of financial instruments that let users trade on the outcome of games much like they might trade shares of Apple or oil futures. This emerging market blurs the line between investing, speculation, and gambling, and is rapidly forcing regulators to confront a set of legal questions they’ve never fully answered.
At its core, a sports event contract is simple. It’s a binary contract tied to a specific outcome. If the event occurs, the contract pays out $1. If not, it pays nothing. For example, a contract might be written on “Will Team A win Sunday’s championship game?” If traders believe the team is likely to win, the contract might trade for $0.70 — reflecting a 70% implied probability. Buyers profit if the team wins while sellers profit if it loses.
This structure mimics derivatives markets more than traditional sports betting. Traders can buy or sell these contracts before the event, take profits early, hedge, or speculate. Prices move dynamically based on supply and demand, not bookmaker odds. Platforms act as intermediaries, matching buyers and sellers and taking small per contract fees rather than running a sportsbook.
In March 2025, Robinhood launched a Prediction Markets Hub, offering event contracts across sports, politics, and economics. They also partnered with Kalshi, a federally regulated exchange classified as a Designated Contract Market (DCM) under the Commodity Futures Trading Commission (CFTC). This allows Robinhood to integrate Kalshi’s event contracts into its trading app.
Sports have quickly become the most popular category. According to Robinhood’s Q2 2025 earnings report, more than $1 billion in volume came from sports event contracts, particularly around professional and college football. The firm charges a $0.01 per-contract commission in addition to Kalshi’s exchange fee, making this a potentially lucrative revenue stream.
For everyday traders, sports event contracts offer a familiar subject matter and a clear payoff. Unlike complex financial instruments, the outcome is clear with a team winning or losing.
For the platforms, this product blends two massive industries, financial trading and sports betting while brings new demographics into their ecosystems.
The rapid expansion of sports event contracts has collided head-on with regulatory ambiguity. Neither gambling regulators nor financial regulators fully anticipated this product category. The result is a clouded landscape of federal vs state jurisdictional battles, regulatory interventions, and integrity concerns.
Robinhood and Kalshi argue that their sports contracts fall under the Commodity Exchange Act, which grants the CFTC authority over derivatives and event contracts. As federally regulated financial instruments, they claim these contracts preempt state gambling laws.
However, many state regulators disagree. Sports betting is traditionally regulated at the state level, with varying legal regimes. For example, New Jersey issued cease-and-desist orders to halt sports event contracts, arguing they amount to unlicensed gambling. Massachusetts regulators opened probes during March Madness, investigating whether Robinhood’s marketing and user onboarding violated state gaming laws.
This jurisdictional tug-of-war remains unresolved. If states succeed in asserting control, firms like Robinhood might need 50 different state licenses, akin to sportsbooks. If federal preemption stands, states may find themselves locked out of regulating a product they see as betting.
The CFTC itself has not fully clarified the boundaries of permissible event contracts. While Kalshi is a registered exchange, the CFTC has historically been cautious about contracts tied to “gaming” or “terrorism” events, often rejecting them as contrary to the public interest.
In early 2025, Robinhood suspended its Pro Football Championship contract after the CFTC requested it be halted pending review. The agency is examining whether such contracts fall under allowed categories or whether they resemble gambling products too closely to be permitted.
The lack of clear guidance leaves platforms exposed. A sudden CFTC policy shift could invalidate entire product lines, disrupt active markets, and trigger legal liabilities.
Another major obstacle involves sports integrity and insider information. Unlike financial markets, where insider trading laws are well established, sports present unique vulnerabilities. Players, coaches, or officials might have nonpublic information that affects outcomes. Leagues worry about match-fixing or subtle manipulation if significant money flows through prediction markets. Platforms must develop surveillance systems to detect unusual trading patterns.
Because Robinhood operates nationally, users in states where sports betting is illegal can still access sports event contracts. This raises complex compliance issues. States argue this undermines their public policy choices while firms argue federal law allows it.
Moreover, event contracts often mimic betting behavior. Regulators worry that users may misunderstand the risks, particularly if they view these as investments rather than speculation. Disclosures, age restrictions, and marketing practices are under scrutiny in multiple states.
Sports event contracts sit at the intersection of finance, law, and culture. Their rise signals a fundamental rethinking of how people interact with sports outcomes not just as fans, but as market participants. But for firms like Robinhood, the legal challenges are formidable.
The key unresolved questions include:
- Will the CFTC formally allow or prohibit sports event contracts?
- Can states successfully assert jurisdiction over these markets?
- How will leagues and integrity bodies respond to increased speculative activity?
- Will the product survive regulatory headwinds, or will it evolve into something entirely new?
For now, Robinhood and its peers are moving fast, pushing the envelope while regulators scramble to catch up. Whether this ends in a thriving new derivatives market or a legal crackdown may define the next chapter in both fintech and sports law.
