Robinhood’s Sports Prediction Markets Are a Hook for Wider Play

As Robinhood has expanded its sports prediction markets, adding Indy 500 and French Open event swaps to its arsenal this month, the U.S. gambling industry establishment has remained on alert.

Robinhood has more than 20 million monthly active users across its full suite of financial products, and CEO Vlad Tenev has frequently talked up the new sports prediction market endeavor. Tenev told analysts on April 30 the company had facilitated about 500,000 sports-related transactions.

Chris Grove, partner emeritus at Eilers & Krejcik Gaming, called the company “a credible threat to the sports betting status quo” in a recent email to Sportico, citing its size and technology chops.

But the fine details of Robinhood’s dealings, some of which have not been publicly reported, underline how a financial technology company better known for stock market trading sees sports as a gateway for users to adopt other products.

“It’s not just about the trading of these events, it is about the engagement that it [generates],” JB Mackenzie, VP of Futures and International, said in a video interview. “When you create a product that has intrigue, such as sports prediction markets, it allows users the opportunity to then look at other asset classes that they may be interested in. What we’ve seen is that is exactly what occurs … they’ll look at a sports event contract, but then also they look at crypto, they’ll also look at equities or options trading.”

That is a different mission from sportsbook operators such as DraftKings and FanDuel, which are nonetheless closely monitoring the rise of sports event futures because of their growing popularity and resemblance to traditional betting.

DraftKings and FanDuel have not expressed interest in user acquisition for the sake of providing people with other asset management services. To the extent they are using sports wagering to drive users to another product, the destination sportsbooks have in mind is the revenue bonanza of mobile casinos in states that have legalized iGaming.

Robinhood’s strategy also contrasts its partner Kalshi, which owns the exchange underpinning Robinhood’s in-app event futures trading capabilities. Kalshi’s entire business rides on the ability to scale prediction markets. Robinhood’s does not.

In fact, Robinhood is lowering its revenue ceiling for prediction markets, seeking instead to reduce risk by using a third-party exchange rather than buying or building its own.

Robinhood does not directly pay Kalshi for the right to host its exchange, Mackenzie said, and it only earns revenue from sports markets by charging $0.01 per dollar traded. Kalshi tacks on additional user fees in a separate process.

Mackenzie said Robinhood made a cost-focused choice not to create or acquire its own exchange. Crypto.com purchased North American Derivatives Exchange Inc. in 2022 and now offers sports event futures there.

“Acquiring an exchange is a very difficult process, to be perfectly blunt,” Mackenzie said. “There’s probably less than six that are out there. So, acquiring one is probably a much bigger decision, and it usually involves a lot of different products outside of just prediction markets.”

Robinhood’s tie-up with Kalshi is non-exclusive, meaning it does not provide an inherent competitive edge over other financial technology companies that offer investments in varied asset classes.

As previously reported by Sportico, Robinhood also takes a slightly different approach toward regulators than Kalshi, albeit one that is still far more aggressive than DraftKings and FanDuel. Kalshi remains live in all 50 states despite fierce legal challenges, but Robinhood is not offering sports contracts in Maryland, Nevada or New Jersey, a company spokesperson said Tuesday.

The three states have issued cease-and-desist orders asking unregistered sports prediction markets to shut down, alleging they are illegally offering a gambling service.

Robinhood and Kalshi have denied wrongdoing, claiming in court that sports futures are distinct from gambling and that the federal Commodity Futures Trading Commission (CFTC) holds exclusive oversight authority. The issue could eventually make it to the Supreme Court due to the clash of state and federal power.

Because it is a trading broker that does not own a prediction market exchange, Robinhood faces fewer potential regulatory actions from the CFTC. The sparsely staffed federal agency that oversees futures trading has recently embraced a hands-off approach to the entire sector, adding to a sense that Robinhood’s prediction markets will not face a blanket ban anytime soon.

Also, Robinhood was one of the biggest corporate donors to President Donald Trump’s inauguration committee, giving $2 million. Kalshi is well-connected with the Trump administration, too, adding Trump’s son Donald as an advisor and seeing board member Brian Quintenz nominated to lead the CFTC. Quintenz said this week in a letter to the CFTC that he will step down from Kalshi’s board when approved as chairman.

If Quintenz is confirmed, he will enter an agency with all four other agency spots unfilled because of recent resignations. This will kneecap the CFTC’s regulatory capabilities to monitor companies like Robinhood, departing commissioner Christy Goldsmith Romero said at a Brookings Institution conference Tuesday.

“I think it’s difficult if there’s one person deciding on what the rules should be,” Romero said. “It does a disservice to regulation.”

Beyond regulatory concerns, whether Robinhood hurts the gambling industry’s longstanding business forces remains to be seen.

A couple of months ago, executives at several prominent sportsbook operators viewed prediction markets as a possible existential threat, and a spokesperson for the American Gaming Association said in an email Tuesday that the trade group remains concerned.

Tribal groups in places such as California where sports betting is banned or limited outside of Native American operations remain staunchly against the rise of sports prediction markets. But corporate sports betting operators could have a change of heart.

Sporttrade, for example, is requesting the CFTC agree not to take action against it if it lists nationwide futures contracts like Kalshi. Sporttrade is a hybrid case—a prediction market hub that has until now been exclusively overseen by state gaming regulators and officially licensed in Arizona, Colorado, Iowa, New Jersey and Virginia.

Meanwhile, DraftKings CEO Jason Robins and Flutter CEO Peter Jackson have gone on record to suggest they could introduce their own futures trading platforms once regulatory questions are resolved.

Until then, Robinhood and its fintech peers, which also offer political markets, can run up the score, each with ultimate objectives tailored to their broader businesses.

“We love what we’re seeing,” Tenev said on Robinhood’s most recent earnings call, “and it’s so early that the potential of this is vast.”