The CEO of fintech company Robinhood said this week that sports prediction markets accounted for nearly half of the one billion contracts that were traded on its platform last quarter, and the company intends to greatly expand its sports offerings as it pursues an “incredibly powerful” revenue avenue.
The company began offering sports trading in Q1 of the year. It initially intended to take action on the Super Bowl but pulled those options after around 48 hours following a formal request from the Commodity Futures Trading Commission (CFTC).
However, on March 17, the firm announced the launch of a prediction markets hub directly within its Robinhood app that allowed customers across the U.S. could trade on a range of contracts supplied by Kalshi, starting with March Madness on the sports side. By March 25, more than $200 million in volume had been traded on the NCAA championship tournaments.
Despite the fact that announcement came late in the quarter, Robinhood Co-Founder and CEO Vlad Tenev said on the company’s earnings call that just less than half of the approximately one billion contracts that were traded in the first three months of the year were sports contracts.
“That’s March Madness, but we also had the Masters and now there’s NHL and NBA contracts as well,” Tenev noted.
Robinhood to focus on ‘discoverability’
Tenev added that because sports as a popular category of events contract trading is still comparatively new, “the potential of this is vast.”
“So the plan is to continue making the product better,” he added. “Now that we have so many contracts, discoverability and organization is something that the team is looking at. We think this is an incredibly powerful, nascent asset class, and you should see more and more contracts and a wide variety of contracts over time.”
At the time of its prediction markets hub announcement in March, Robinhood teased that it would roll out a more comprehensive event contracts platform later this year.
Sports contracts bringing new users
Asked about the typical behaviors of event contracts traders compared to those in other areas of Robinhood’s business, Tenev noted that the company likes prediction markets so much because “it appeals to a broad range of customers.”
“And we actually see very different behaviors even within prediction markets when you talk about different contracts,” he added. “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. And so many of young people who are our customer base love sports and love following news and current events. So actually, what you see is pretty wide dispersion.”
Tenev was speaking on the day when Robinhood reported a quarter of strong year-over-year growth, including total net revenue that was up 50% to $927 million, trading volumes that rose by double digits across the board and a record of $18 million in net deposits.
The Robinhood call also came on April 30, the mooted date for the planned CFTC roundtable on prediction markets that was canceled without a public reason in recent days.
In its statement unveiling its prediction markets hub in March, the company said it had been “in close contact” with the CFTC and looked forward to continuing to collaborate with the commission.
