Robinhood: "Event Contracts" Become a New Growth EngineRobinhood Markets ( NASDAQ:HOOD ) reported November monthly metrics yesterday. Data shows lower trading volumes across all asset classes except for the newer events stream.
Equity trading volume of $201.5B in November is 37% lower from October but up 37% Y/Y.
Options contracts totaled $193.2M last month, down 28% M/M and up 24% Y/Y.
Crypto volume fell to $28.6B from $32.5B in October and $35.2B in November 2024.
Meanwhile, events contracts totaled 3.0B in November, up 20% from a month ago, highlighting growing interest in prediction markets whereby people can trade on the outcome of future events, from sports to economic developments.
One of the most striking highlights of the earnings report is the explosive growth of the "Event Contracts" (Prediction Markets) business. In Q3, the trading volume of event contracts on the platform surged to 2.3 billion, more than double that of Q2.
Robinhood launched its Prediction Markets in March. By the end of September, this has become the company’s 11th business lines generating $100M or more in revenue.
The fourth quarter started even stronger, with trading volume in October surpassing 2.5 billion. November volume of 3.0B is 20% up from October. Prediction markets quickly become a new growth engine for Robinhood.
Recently, Robinhood expanded the scope of event contracts from the initial focus on sports and finance to include politics, entertainment, and technology. Through a partnership with Kalshi, Robinhood allows users to bet on the "yes/no" outcomes of future events in sports, politics, entertainment, and technology.
On November 25th, Robinhood announced that it is teaming up with Susquehanna to launch their own prediction market. They are able to do so after acquiring a designated contract market (DCM) named MIAXdx, which was previously owned by financial firm Miami International Holdings.
Robinhood will be the controlling partner in the joint venture, while Susquehanna will be a “key partner and day-one liquidity provider.” MIAX will continue to hold a 10% stake.
This year, Predication Markets are the fastest growing sector in financial markets. It is also the most invested field outside of A.I.
On November 10th, Polymarket locked in a $2 billion investment from ICE, parent of NYSE. The market valuation of $9 billion made Shaye Coplan, its 27-year-old founder, the youngest self-made billionaire in history.
Three days later, Kalshi secured a $1 billion Series E funding round, led by Sequoia Capital, and Andreessen Horowitz. The new market cap of $11 billion made Luana Lopes Lara, the 29-year-old Kalshi cofounder, the youngest self-made female billionaire in history.
Robinhood could become the market leader in event contracts. It has the widest distribution network with its 27 million funded accounts. The upcoming new prediction contract Exchange would strengthen its hands, allowing Robinhood to capture a bigger slice of the transaction fees.
In my opinion, the fast expansion of trading categories risks blurring the lines of trading and gambling. Several prediction markets are being sued for running unlicensed sports betting operations. Other opinion-based events could be rigged, if the rewards are high enough.
This is why I am launching WeatherBook, a prediction market focusing on high-impacted weather events. I have identified four key themes where weather trading makes sense: 1) Weather Catastrophes; 2) Sports Weather; 3) Commodity Weather; and 4) Travel and Holiday Weather.
The counterparty of each weather event is Mother Nature. The outcome will be based on publicly available weather data, where no amount of money could influence the results. If you want to learn more about WeatherBook, please drop me a note or send me an email.
