Robinhood is betting that its prospects wish to commerce on completely the whole lot.
On Tuesday, the favored stock-trading app unveiled a slate of updates to its prediction markets enterprise, aggressively increasing into sports activities. Now, Robinhood customers can commerce contracts tied to particular skilled soccer gamers’ performances, in addition to prepackaged combos for particular person video games.
Early subsequent yr, prospects will be capable of mix as much as 10 outcomes—reminiscent of winners, spreads, and totals—right into a single, custom-built contract. Robinhood’s information website, Sherwood, can be launching a brand new sports activities publication, Scoreboard. Ultimately, Robinhood plans to launch contracts that span not simply a number of video games, however a number of classes—from sports activities to local weather to politics.
“If prospects say they’re trying to commerce a particular class or particular occasion, we’re all ears,” Adam Hickerson, Robinhood’s senior director of futures and prediction markets, tells Quick Firm.
Robinhood’s entrance into prediction markets might be seen as a pure fruits of the trajectory it set into movement years in the past. For the uninitiated, prediction markets enable folks to commerce on real-world occasions by shopping for and promoting contracts. These occasions can vary from sports activities matches to political elections to who Time journal will identify as its Particular person of the Yr.
Since Robinhood launched prediction markets in late 2024, they’ve turn into the corporate’s fastest-growing line of enterprise. Within the third quarter this yr, it reported that customers traded 2.3 billion prediction-markets contracts. Then, in October alone, that determine reached 2.5 billion.
The preferred contracts have been in sports activities. Robinhood maintains that customers usually are not playing, as buying and selling in the marketplace units the percentages, not the platform itself. Nonetheless, the sports activities contracts faucet into an enthusiasm for sports activities hypothesis. According to the Pew Research Center, 22% of adults within the U.S. have wager cash on sports activities previously yr. Amongst males youthful than 30, that determine rises to 36%. Robinhood isn’t the one app getting within the recreation: Fanatics, a worldwide sports activities platform, simply launched a prediction-market app, turning into the primary sportsbook to take action.
Some regulators imagine determination markets cross the road into playing. Quite a few states have despatched Robinhood cease-and-desist letters, demanding prediction markets cease providing sports activities contracts. In response, Robinhood sued New Jersey and Nevada earlier this yr, sustaining that its markets are utterly authorized.
There isn’t a signal of regulatory turmoil dampening Robinhood’s ambition. In November, the corporate introduced plans to start out its personal prediction market, launching an change with Susquehanna Worldwide Group. “That is simply the tip of the iceberg,” Hickerson says.
From meme shares to prediction markets
In 2013, Vlad Tenev and Baiju Bhatt based Robinhood as a simple, commission-free approach for customers to commerce on their telephones. Enterprise boomed in the course of the COVID-19 pandemic as bored People, flush with stimulus checks, flocked to the app. The web brokerage grew to become identified for its reputation amongst younger adrenaline junkies who handled investing much less like retirement planning and extra like a cell recreation.
Robinhood’s supporters applauded the corporate for democratizing finance. Critics, in the meantime, slammed it for encouraging customers to commerce shares like gamblers betting on sports activities. In 2021, legendary investor Charlie Munger told CNBC that Robinhood was “a playing parlor masquerading as a good enterprise,” calling it a “sleazy, disreputable operation.”
The anti-Robinhood backlash boiled over in the course of the GameStop saga, when customers fueled a buying and selling frenzy that drove meme shares to absurd highs. Within the aftermath, Robinhood dialed again on its so-called gamified parts, removing a confetti animation that accompanied sure achievements. In a February 2021 listening to earlier than Congress, Tenev testified that the “overwhelming majority” of Robinhood’s prospects have been long-term buyers, not day merchants shopping for meme shares.
Ultimately, nevertheless, Robinhood acknowledged the significance of its lively day merchants—customers much less all in favour of conventional shares and way more all in favour of riskier merchandise like cryptocurrencies. “These are our most engaged prospects that generate the lion’s share of our income,” Tenev told The Wall Street Journal in November. “We put our greatest folks on lively merchants.”
Robinhood retains these helpful prospects completely happy by letting them spend money on no matter their hearts need. More and more, which means prediction markets.
Betting on predictions
Prediction markets have been round for more than a century. They’ve primarily existed as a distinct segment curiosity, not a significant focus for buyers, novice or skilled. Then got here final yr’s election.
Greater than $3.3 billion was traded in 2024 presidential election contracts, totally on prediction market Polymarket. Robinhood launched its personal contracts a month earlier than the election, its first foray into the prediction markets. By the point Trump gained—as forecast by the markets—the idea of prediction markets had cemented itself within the American mainstream.
On the time, it was not authorized for People to make use of Polymarket. In consequence, it operated offshore, though People probably nonetheless used it by way of VPNs and due to Polymarket’s reliance on cryptocurrency. Studies alleged that a lot of the election-trading quantity got here from “wash buying and selling,” which inflates market exercise and is a type of market manipulation.
In January, Kalshi launched “100% legal” sports activities buying and selling in all 50 states, regulated by the Commodity Futures Buying and selling Fee. The following month, Robinhood introduced a partnership with Kalshi for Tremendous Bowl contracts. However mere hours after the announcement, Robinhood canceled the contracts on the request of the CFTC. The company had “critical issues” that the contracts “might not be permissible underneath the regulation,” a CFTC representative said at the time.
Robinhood was undeterred. In March, simply forward of the NCAA basketball match, the corporate launched its prediction markets hub, nonetheless in partnership with Kalshi. A CFTC official told Sportico that the company had “no authorized justification to forestall Robinhood from providing entry to those contracts.”
Robinhood is competing not solely with Polymarket and Kalshi but in addition with Coinbase, which is reportedly planning to introduce prediction markets, due to its personal partnership with Kalshi.
Defining “playing”
Legal guidelines on playing—and the way regulators interpret these legal guidelines—are set to be one among Robinhood’s largest obstacles on the subject of determination markets.
Kalshi and Robinhood keep that their customers are buying and selling, not playing. Kalshi and Robinhood don’t generate income primarily based on outcomes, however as an alternative earn income by way of transaction charges. They emphasize that, in contrast to sportsbooks, prediction markets don’t take bets or set odds.
For example, if the New England Patriots are enjoying the Tennessee Titans, a consumer who thinks the Titans will win might purchase shares on the “sure” place. Shares can be inexpensive if Tennessee is the underdog, however the worth is ready by the markets’ perceived likelihood. If the Titans win, every profitable share pays out $1, whereas those that picked the Patriots are left empty-handed.
If regulators agree with determination markets’ line of reasoning, corporations like Robinhood and Kalshi ought to be capable of provide sports activities contracts on-line in all 50 states, together with states the place sports activities betting is unlawful or restricted. Playing is banned for folks underneath 21, however 18-year-olds are sometimes allowed to commerce occasion contracts. Many sports-betting laws—such as safeguards to prevent game fixing—don’t at the moment apply to prediction markets.
Not each regulator is satisfied by determination markets’ arguments. Along with New Jersey and Nevada, Connecticut, Ohio, Maryland, Illinois, and Arizona have despatched Robinhood and different determination markets cease-and-desist letters.
Nonetheless, the choice markets have amassed some highly effective allies.
In January, Donald Trump Jr. joined Kalshi as a strategic adviser. Donald Trump Jr. serves as an advisor for each Kalshi and Polymarket. (The truth is, Polymarket’s return to the U.S. and its legalization got here shortly after the president’s son grew to become an investor.)
In September, President Trump nominated Kalshi board member Brian Quintenz to chair the CFTC. A month later, Trump Media announced a prediction market partnership involving Crypto.com and Fact Social.
Every little thing, all over the place, all of sudden
Folding sports activities contracts, inventory trades, online banking, and crypto right into a single app will inevitably upset traditionalists. Outdated-school buyers may additionally be skeptical of Robinhood’s different bulletins on Tuesday, centered on artificial intelligence: upgrades to its AI-powered investing assistant and the launch of personalised every day Digests that analyze customers’ portfolios.
For Robinhood, the seize bag of selections is the purpose. “Every little thing comes right down to: What does the client need?” Hickerson says. Robinhood takes suggestions significantly, he mentioned, and executives have heard “loud and clear that these are some options that they actually wish to commerce on.”
Scrolling by the contracts on any prediction market reveals simply what number of matters encourage hypothesis. As of Monday, greater than $17,000 in contracts had been traded on Kalshi associated to the subject: “What’s going to Vlad Tenev say in the course of the Robinhood keynote?” (Buying and selling exercise signifies a 72% probability that Tenev says “sport.”)
“Finally,” says Oren Naim, Robinhood’s vice chairman of platforms, “our long-term imaginative and prescient for the corporate is to turn into your one-stop store for something—any monetary want—throughout the board.”
