- Robinhood is deepening its involvement in the booming world of prediction markets.
- It is partnering with Susquehanna International to expand its offering of event contracts.
- Robinhood stock surged on Wednesday, adding to this year's stellar gain of over 230%.
The move: Robinhood stock jumped 9% on Wednesday, shaking off the volatility that has weighed on the stock in November. Wednesday's gain brings the stock's year-to-date rally to 235%.
The chart:
Why: On Tuesday, Robinhood announced a deal with global trading and technology firm Susquehanna International Group to take over LedgerX, a regulated crypto exchange that was once part of the now-defunct FTX empire. Since the fall of FTX, it has been owned by regulated exchange operator Miami International Holdings, which has sold a 90% stake in the platform to the two companies.
"Robinhood is seeing strong customer demand for prediction markets, and we're excited to build on that momentum," said JB Mackenzie, Robinhood's vice president and general manager, futures and international.
What it means: Until now, Robinhood's exposure to prediction markets has been through Kalshi, a platform that has helped popularize event contracts on everything from sports to political events. Even the brokerage's relatively small offering of betting contracts has already had a big impact on the business, analysts at Cantor Fitzgerald wrote on Wednesday.
"Prediction markets have become HOOD's fastest growing product line by revenue in the company's history. Within one year since launch, over 9bn contracts have been traded by more than 1m customers."
Now Robinhood is in an even better position to continue capitalizing on the booming market. Cantor analyst Brett Knoblauch highlighted the positive aspects of acquiring a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO) for Robinhood stock.
"While we believe one of the main reasons HOOD is doing this is for prediction markets, the DCM license will allow HOOD to offer futures and options on futures," he stated.
"The DCO will allow the entity to clear trades in futures, options on futures, and swaps, and the SEF will allow HOOD to offer a platform for trading swaps, such as standardized interest- rate swaps and credit derivatives.
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