Robinhood (re)launch Prediction Markets

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Robinhood's Prediction Market Launch 📊

Robinhood have officially launched their prediction market through a partnership with exchange Kalshi, marking a significant expansion of their offerings beyond traditional securities and cryptocurrencies.

The move positions Robinhood as a direct competitor to crypto-native prediction platforms like Polymarket, which saw an extraordinary $3.6 billion in volume during the 2024 U.S. presidential election and has now recorded over $6 billion in lifetime sports-related contract volume, making sports the biggest market for the crypto-native prediction market.

Robinhood users can predict a variety of outcomes, with initial markets focused on Federal Reserve interest rate decisions and the NCAA men's and women's college basketball tournaments.

JB Mackenzie, VP & GM of Futures and International at Robinhood, said:

"We believe in the power of prediction markets and think they play an important role at the intersection of news, economics, politics, sports, and culture."

This is against the backdrop where trading platform and Robinhood partner Kalshi is already fighting the CFTC about its definition of these events contracts. This ended up with Kalshi filing against the regulator.

Kalshi filed to launch political predictions markets in June 2023, which was rejected by the CFTC in September 2023 — citing concerns over legality, as the contracts ‘resembled gambling and could be considered contrary to the public interest under federal and state laws’. In September 2024, courts allowed Kalshi to proceed with these contracts — with the rationale based on disagreeing with the CFTC’s equation of ‘gaming’ with ‘gambling’.

Weeks before the Super Bowl, Robinhood announced that they would be launching the ability to trade these event contracts through a partnership with Kalshi. Robinhood however removed the ability to trade these contracts after a formal request from the CFTC — saying they are “disappointed by the outcome, especially given that we have been in regular communication with the CFTC”. The reversal here suggests that Robinhood have now launched a more compliant offering.

The landscape for prediction markets is particularly interesting.

To summarise:

• Crypto predictions market Polymarket saw $1.1bn+ in volume on Super Bowl LIX.

• The CFTC is investigating Polymarket and subpoenaed Coinbase related to this.

• This comes weeks after leading cryptoasset exchange Crypto[dot]com announced they would launch sports trading contracts.

• The CFTC then announced a probe into Crypto[dot]com.

• Trading app Robinhood announced they would launch sports prediction contracts in partnership with Kalshi, a trading markets company.

• The CFTC formally requested Robinhood to halt the feature.

• …All the while Kalshi are embroiled in regulatory warfare in the background.

• And then… Robinhood relaunched prediction markets with Kalshi…

• All the while… (1) DraftKings are hoping for a positive ruling from the CFTC to allow them to enter the market, (2) Some politicians think this is just gambling redressed, and (3) 10+ Gaming businesses have come to the CFTC citing concerns that prediction markets are gambling, and have been backed up by some politicians

All this whilst Robinhood posted half of its Q4 2024 revenue in crypto trading, and its president said that they are using stablecoins to settle transactions on the weekend.

Things are accelerating at a pace all round that is hard to keep up with.

Analysis & The Questions to be Answered🧠

This is very messy.

There is no global regulation for products like this, and depending on where you live they will fall into the category of gambling or finance. In the U.S., this is even more complex due to state-by-state regulation.

The best way to decipher what’s going on here is ask the questions that need to be answered… and answer them as best as possible.

(1) Is this gambling rebranded?

Yes and no.

And there’s added nuance → it depends on where you’re located.

For example, France, the U.K., the U.S. and many other territories have outright banned Polymarket. But the U.S. haven’t banned Kalshi or Crypto[dot]com.

If Polymarket were regulated in those territories, it would likely be regulated like a traditional peer-to-peer exchange, as a gambling entity in France and the U.K. But in the U.S., it would fall under the CFTC’s remit.

That’s because the U.S. would look holistically at Polymarket as an ‘enabler’ of ‘betting’ lines rather than the creator of them. i.e. — they are enabling people to bet one way or another on an outcome, but are not setting the line like a traditional bookmaker.

The ‘Is this gambling?’ question is like Schrödinger's cat or the observer effect.

It’s both gambling and it’s not… until it’s regulated in a specific region that the participant is located. Crypto adds complexity… because it’s global.

This diagram is an attempt at trying to bucket different products into different categories, but again — this would look totally different depending on the jurisdiction you choose.