Robinhood’s latest venture raises the prediction-markets stakes.
The U.S. brokerage made popular by offering slices of stocks to retail investors is launching a futures and derivatives exchange in a bid to expand its prediction markets business. Robinhood (HOOD) announced Tuesday that the exchange will be managed by a joint venture with market maker Susquehanna International Group.
Its shares were up 10% as of Wednesday afternoon, solidifying Robinhood’s position among the top gainers within the benchmark S&P 500.
WHY THIS MATTERS TO YOU
Robinhood built its business on catering to individual investors, starting with fractional shares of stocks and, more recently, offering banking and mortgage services to some of its more active users. As its business grows, the brokerage appears to be stepping into position to woo bigger customers.
Robinhood aims to be a one-stop shop for trading in stocks, crypto, and events contracts as well as banking and mortgage services. While it faces fierce competition in rivals like Polymarket, which yesterday announced receiving a regulatory nod to resume U.S. operations, Robinhood could also attract partners that want to get into the events-markets action but don’t have the infrastructure to do so.
Robinhood’s new venture comes with an acquisition—a 90% stake in MIAXdx, a CFTC-licensed derivatives clearing house; the deal is expected to close in the first quarter of next year. Miami International Holdings (MIAX) will retain the remaining shares. The company said its new exchange would serve its derivatives business and other futures commission merchant platforms.
A Robinhood spokesperson said its derivatives business “plans to continue to partner with multiple DCM/DCO partners,” referencing the entities where derivatives contracts are executed and settled. “There will be no changes in the short term” for that business’s customers, the spokesperson said. Robinhood offers some of its event contracts through Kalshi, another dominant player in predictions markets.
“Prediction markets are really on fire,” Robinhood CEO Vlad Tenev said during the company’s third-quarter earnings call earlier this month, according to a transcript provided by AlphaSense. Robinhood has doubled volume in that business every quarter since it launched roughly a year ago, according to the company, reaching 2.3 billion contracts in the third quarter.