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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:

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.

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.

Right now, it feels like the most important party in this equation is the CFTC… the ball is in their court and the direction they go with eventual, formal legislation will be important.

(2) Why is crypto so powerful here?

This is not what Robinhood is doing, because they are using Kalshi. But it’s still important to outline answers to ‘why crypto?’.

Crypto is important here because you can use smart contracts to automatically payout on predictions.

You can share in liquidity globally in permitted jurisdictions.

Settlement and payment are faster, cheaper, transparent and borderless.

It makes sense that crypto rails have caught on with prediction markets.

(3) But crypto prediction markets have failed before… right?

Yes, but here’s why it’s different this time.

Early creations within these markets tried to use native protocols with a native token associated, to decentralise the prediction market.

However, this had its issues. If you decentralise the prediction market, that means there is no sole arbiter of truth, and you can often run into ‘non-consensus’ on the truth, or the nuance of an answer to a question in which money has been wagered to predict the outcome of.

Polymarket does not have this issue. Crypto[dot]com is a centralised exchange. Robinhood and Kalshi, are both centralised, also.

(4) Why is Robinhood doing this so important?

Three key reasons:

If you don’t think this is a big deal then… 🤷‍♂

(5) The convergence is here and it’s happening FAST

2025 is the year crypto businesses stop being ‘just’ crypto businesses.

The likes of Tether, Coinbase, and Kraken are all developing offerings that look and feel more like financial services products. Robinhood are doing the same from the other end. They have started as a securities broker, added crypto and now predictions markets.

This convergence is great for the consumer, but a nightmare for regulators and also the companies wanting to launch products in this domain, as uncertainty remains around what they can and can’t do.

(6) Consumer volume and media attention will demand regulation

There is a demand for prediction markets. Consumers have spoken with their activity.

Media is using prediction markets to point to the ‘wisdom of the crowds’ probabilities in sports, politics and more.

Indeed, even institutions who were asked in a recent survey by Paradigm voted Predictions Markets as 4th in ‘strategies that your organization implemented to manage or reduce costs in delivering financial services’.

The genie is out of the bottle and it’s not incumbent on regulators to ensure consumers can participate safely.

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