Robinhood Is Trying To Be A Bank And A Sportsbook, And Why That's A Terrible Idea

News: A hearing is set for Wednesday in Kalshi's case against New Jersey; Ohio cease-and-desist on prediction markets for sports

Do you want a boring picture of a bank, or a cat gif that is reminiscent of a bank? I think we all know the answer.

Should I even have to write that headline? Is there anyone who legitimately thinks that a bank should be a sportsbook, too?

Whenever I think the gambling world has gotten to peak ridiculousness, we get something new. Here’s the background:

• Robinhood is a sportsbook as of earlier this month, thanks to a deal with Kalshi. Yes, yes, you’re “trading sports event contracts” that are federally regulated via the Commodity Futures Trading Commission. But at the end of the day, it’s just gambling. (And we now have three states telling them they shouldn’t be doing it there.)

• Robinhood is rolling out wealth management services and banking. From RH’s newsroom.

  • “We’re announcing Robinhood Banking, a platform launching later this year that will bring the private banking experience exclusively to Robinhood Gold members, providing access to traditional checking and savings accounts with luxury benefits. You will be able to apply for an account right from your phone, send money across the world in 100+ currencies, and even get cash delivered directly to you. … Robinhood Banking will launch this fall, at which point the Robinhood Credit Card app will become your banking app.”

  • Yes, all of this is via technically separate apps, but they are designed to offer a “seamless experience” — Robinhood’s words, not mine.

So yeah, a seamless banking/sportsbook experience. At a minimum, I would argue Robinhood needs to allow all customers — or at least banking customers — the ability to opt out of prediction markets and/or sports betting on the investment app.

Let’s do a quick and easy thought experiment. Let’s say Bank of America or Wells Fargo announced they are launching sportsbooks under their brands that are seamlessly integrated with their banking apps. This is, of course, a ridiculous concept. Everyone would have their pitchforks out, and the idea wouldn’t even make it out of a pitch meeting. It’s not clear to me why this should be at all different for Robinhood, other than it gets a pass as a “disruptor.”

"Being in a position to provide money to gamblers while also profiting directly from their gambling behavior may create dangerous misalignment of incentives, profits and consumer protection,” Keith Whyte, founder of Safer Gambling Strategies, told The Event Horizon.

When dumping sports betting into a brokerage, you can argue that may also not be great. But a lot of people are using Robinhood to speculate on investments as a quasi-gambling product. (Some people are using it more as an investment product, I am sure). Either way, I can at least wrap my head around allowing sports event contracts next to that product, even if I don’t love it.

I also think there’s a delta between all of this being offered at Robinhood and at Kalshi. I think people using Kalshi know exactly what they are getting into when they start trading there. I don’t think many users at Kalshi are pretending this is an investment product; although there is some amount of legitimate hedging activity on some markets. Legality aside, I think everyone knows they are gambling.

Will someone pump the brakes on this, or at least pretend like it’s at least a bit problematic? I guess we’ll see.

Some other quick prediction markets news:

ICYMI: Ohio cease and desist

Ohio regulators told all three platforms that are offering sports event trading to knock it off:

News: Ohio Becomes Latest State To Send Cease-And-Desist Letters To Kalshi, Robinhood

Update in Kalshi’s New Jersey and Nevada cases

We’re getting some quick movement in Kalshi’s federal lawsuit against the New Jersey Division of Gaming Enforcement.

• A hearing will be held on Wednesday at 2:30 p.m. Eastern regarding Kalshi’s motion for a temporary restraining order in the case in the US District Court in the District of New Jersey. Kalshi is hoping for a TRO so that it can continue to serve the state during the case about the legality of Kalshi’s sports product in the state.

• The defendants — a number of officials in NJ — have until 4 pm on Tuesday to file an “informal letter-brief” in response.

• Judge Edward Kiel is the assigned judge for the case.

In Kalshi’s Nevada lawsuit, we had a judge, but now we don’t. Judge Jennifer Dorsey recused herself, apparently because her husband is in the gaming industry. A new judge will need to be assigned.