Robinhood’s fledgling sports event contract market has yet to comprise much of the prediction platform’s trading volume, but in a Q1 earnings call, CEO Vladimir Tenev told investors to expect an expansion of what he considers “an incredibly powerful, nascent asset class.”
Those plans may be aided by the series of legal victories fellow operator Kalshi rung up recently in federal courts. Kalshi has vigorously defended its national trading of sports events contracts, claiming oversight by the Commodity Futures Exchange Commission that supersedes state regulation and licensure. On Monday, the CFTC dropped its legal challenge to a September 2024 ruling by the U.S. District Court for the District of Columbia that allowed Kalshi to offer contracts on the federal election.
Kalshi currently has a lot more to contest in terms of sports.
Tenev said of the billion contracts traded at Robinhood in the last six months “just less than half” were sports-related. Sports volume has been much higher at Kalshi.
“That’s March Madness, but we also [had] the Masters,” Tenev said during the earnings call. “And now there’s NHL and NBA contracts as well.
“The plan is, still continue making the product better now that we have so many contracts, discoverability, and organization, something that the team is looking at.”
Tenev said Robinhood plans to launch “more and more contracts and a wide variety of contracts over time.”
“We love what we’re seeing,” he added. “And it’s so early that the potential of this is vast.”
Tenev said in December that 507 million contracts were traded on the U.S. presidential election.
Robinhood sees melding of contract speculators
Robinhood’s financial technology portfolio already includes stock trading, banking, retirement investment, and cryptocurrency speculation, which are often of interest to investors of specific age groups. Tenev said a defining attractiveness of prediction markets so far has been its broader appeal.
“We actually see very, very different behaviors even within prediction markets when you talk about different contracts,” he explained. “So for example, the group of customers that engages with the economic prediction markets is not the same group of customers that engages with The Masters, for instance.”
A St. Bonaventure/Siena Research study in 2024 found that the majority of legal sports bettors in the United States were men aged 18-49.
Tenev suggested that preferences are beginning to overlap at Robinhood.
“Many young people who are our customer base love sports and love following news and current events,” he continued. “So actually what you see is pretty wide dispersion. It’s not like other assets where if you’re an options trader, a number of options traders are coming and primarily engaging with that.
“You see these customers engaging in a wide spectrum of assets and sort of like trading activity quite broad and varied among the rest of our products.”
Prediction platforms now national sportsbooks?
Alex Kane, CEO of prediction platform Sporttrade, said in a letter to the CFTC last week that he wanted his company to be able to trade sports event contracts nationally as a matter of survival, while acknowledging they were sports bets.
In his letter to the CFTC, Kane asked to follow Kalshi’s lead in self-certifying new markets, or proceeding with them under the belief that they fall under the the federal body’s purview.
Kane said the CFTC signing off on his request would “encourage an open and fair capacity to offer sports event contracts, giving consumers choice among like options that all provide safe, regulated, and compliant experience.”
Robinhood canceled plans to offer Super Bowl markets after a CFTC request and has proceeded with much less fanfare than Kalshi has under firebrand CEO Tarek Mansour.
Reporting by Comped last week revealed that Illinois regulators were waiting for some federal litigation to be resolved before charting a further state-level response. Kalshi already successfully appealed to federal courts to halt cease-and-desist orders in Nevada and New Jersey.
The CFTC’s unwillingness to clarify the legality prediction market’s national approach and the drop of its appeal on Monday have led industry analysts to contemplate a coming victory for the likes of Kalshi, Sporttrade, and Robinhood.
Andrew Kim, a partner at Goodwin law firm and an expert in prediction market expansion, wrote Monday in a LinkedIn post:
“I don’t think the CFTC’s decision to drop its appeal will have any material impact on Kalshi’s ongoing battles with state regulators.
“(One caveat to that: Nevada said in court that it was going after ‘election-related contracts,’ but it’s not clear whether it was just trying to preserve its rights in case the CFTC had won at the D.C. Circuit.)
“Momentum is very much in prediction markets’ favor — especially Kalshi’s. It’ll be interesting to see whether the CFTC wades into sports contracts next, or if it’s content to let Kalshi fight that fight.”
