Bloomberg Audio Studios, podcasts, radio, news. We're going to stay with Robin Hood because the company this week rolled out updates to its AI assistant and prediction market offerings. In fact, prediction markets are now Robin Hood's fastest growing product line by revenue with analysts at Citizens expecting five-fold growth by 2030. So joining us live on the heels of that announcement is the CEO of Robin Hood, Vlad Tenev, and my Bloomberg Crypto co-host, Tim Stenovec, joins us now as well. Vlad, it's great to speak with you, and I want to start with these sports wagering capabilities that you've added to your suite of offerings here, these preset combination contracts for professional football games, NFL games. It sounds like this is your version of parlays that are offered by traditional sports books. So what is the difference between a combination trade and a parlay?
Yeah. So as you mentioned, this is part of our big unveil of prediction markets, which we've offered for a little bit over a year. But remember, we started with just one prediction market on the platform, which was the presidential election in 2024. And since then, we've gone to over 1,500 contracts on the platform across pretty much every domain. We've got politics, we've got world affairs, economics, culture, and we recently added weather and, of course, as you mentioned, sports. I think the major innovation here and why it's been so disruptive to the sports industry is you can take the general prediction markets infrastructure, which are markets that trade on regulated exchanges where buyers and sellers are matched, and apply them to pretty much everything. Now, of course, sports is an important subset of that because there's an existing large market there, but we see a world where actually the percentage of non-sports contracts grows much faster than sports. And I think several big industries are likely to be disrupted in the future, things like insurance. You can imagine with the weather contracts we have on the platform, people have already pointed out that trading and hedging with an insurance weather contract could be superior to buying traditional insurance through a broker. So as the market matures and you see increased institutional participation, I think we could be at the very beginning of a prediction market super cycle with growth in volumes and listed contracts accelerating from here.
Well, we've had a few incidents now of alleged insider trading in prediction markets. Do you think insider trading poses a risk to fairness in prediction markets or could it help ensure market accuracy by allowing those with privileged information to participate?
Well, I'm not exactly sure which incident you're referring to. There was an incident in the sports betting space which is entirely differently regulated, right? Those are regulated on a state-by-state basis and I think they're obviously working hard to address these issues. But what I tell you is financial markets have had the infrastructure in terms of surveillance and monitoring to deal with these types of concerns and they've been dealing with it for decades because obviously insider trading originated as a market integrity measure for the equities market. You know, we wanted to make sure we had protections as an industry to make sure corporate insiders and other folks weren't using their privileged information about what a company was going to release to trade ahead of that disclosure being available publicly. So, this has pretty much always been a financial markets thing and so I think financial markets have the best tools to deal with it.
Vlad, I'm wondering about prediction markets and specifically Robin Hood and others too if they offer enough protections to consumers against addictive betting. How do you solve for that at Robin Hood?
Yeah, I mean I think our philosophy is if you look at prediction markets, there's a tremendous amount of value in the diversity and variety of contracts. And what we're actually seeing similar to trading, a lot of people actually have strategies. So it's not as much like I'm buying a team because I'm a fan of it, but there's systematic trading and people are analyzing these things and they have strategies around it. And it goes beyond sports. You guys were mentioning the Warner Brothers merger situation. If you notice, the question on everyone's mind is what's likely going to happen to Warner Brothers? Who's going to acquire the company? Is it going to be Netflix or Paramount Sky Dance or neither of the above? And right now we look at the stock prices and we try to reverse engineer what's happening with this situation. Well, there's a prediction market that we illustrated on the platform and you can see last night it was showing 55% chance Paramount would actually be the ultimate acquirer. This morning it went to 75% Netflix. So even in terms of what value they provide to the news, it can be incredibly powerful and more direct to zero in on the results of that specific outcome. And now, I'm not saying everyone should be trading prediction markets. Like any derivatives market, I think people have to make sure it's right for them. But I think they're resonating quite strongly with our active traders. And also, I think they're a great way for other folks who may be interested in trading to learn about the new asset class.
It's an incredibly competitive space, Vlad. I don't need to tell you that. And you have companies and people being minted billionaires as a result of the competitive space right now. I'm wondering about the dynamics and how you view the competitive dynamics and whether you have an edge after acquiring LedgerX. Talk about that a little bit.
Yeah, I mean right now we're the largest broker in the space and actually the brokerage landscape is not very competitive. I mean we're pretty much the only game in town in terms of the exchanges offering prediction market services. I think there's a big argument to be made for this to be an increasingly institutional business over time. In the same way that crypto markets started off being exclusively retail and have sort of built up institutional adoption over time, I think you can make a perhaps even stronger argument that the same is going to happen with prediction market event contracts. If you just look at the trillions that are being deployed into interest rate futures and swaps to hedge interest rate risk by institutions, prediction markets offer a way more direct mechanism for actually hedging that risk. So, our acquisition, our partnership with SIG to acquire LedgerX, I think is a way for us to tap into what we believe will be a growing institutional market for this asset class. And if you couple that with our broad retail reach, I think that positions us well to continue growing with the space, if not faster than the aggregate growth in the sector.
What's the effect that that acquisition has on, let's say, Kalshi for example, that is a partner of yours right now but also a competitor?
Yeah, I mean the more prediction market exchanges join the market, the more price competition there is, and we see a world where it's increasingly multipolar. I think there's going to be multiple dozens of prediction market exchanges and I think that will lead to a great outcome for ultimately the traders in the space because the more exchanges there are, the more we put pressure on the transaction fees and get them to be close to rock bottom, and what happens is more liquidity comes into the space, more institutional interest, and prices go down. And as with any asset, you know, crypto, equities, options, Robin Hood is just focusing on providing the best execution for customers. So, we connect to a wide variety of exchanges and market centers to facilitate that.
