If the March Insanity workplace betting pool doesn’t fairly scratch your itch for motion, Robinhood’s (HOOD) bought you lined.
This week, the dealer launched a prediction markets buying and selling platform within the Robinhood app, enabling clients to “have interaction with occasions that align with their pursuits” by buying and selling contracts on the end result of particular real-world occasions.
Not into sportsball? You may also wager on Could’s goal fed funds fee in Robinhood’s new prediction market hub. Leisure, politics, the economic system and different hotly debated water-cooler matters are positive to comply with.
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What’s occasions buying and selling?
The grownup time period for occasions buying and selling is derivatives buying and selling, which includes shopping for a contract whose worth is derived from the worth of an underlying asset and even one other spinoff. (This derivatives explainer expertly unpacks the earlier sentence.)
Basically, derivatives are a aspect wager between market individuals on what’s going to occur. Occasion contracts specifically are structured round “sure” or “no” outcomes, with the worth of the contract primarily based on the probability of the occasion’s final result.
When you’re proper, the contract can pay out $1 (minus commissions and costs). In any other case, the contract expires nugatory.
There are a number of sorts of derivatives, together with choices, futures, forwards and swaps — as in credit score default swaps, which have been on the middle of the worldwide monetary disaster in 2008-2009.
Robinhood prediction contracts will initially be obtainable within the U.S. by means of KalshiEX, an event-based alternate that operates beneath Commodity Futures Buying and selling Fee (CFTC) rules. Aspect be aware: KalshiEX efficiently sued the CFTC in 2024 for rejecting its proposal to make use of spinoff contracts to wager on congressional management.
Robinhood’s taking its second shot
This isn’t Robinhood’s first foray into the predictions market. In 2024, the dealer allowed clients to commerce on the end result of the presidential election. Earlier this 12 months, on the request of the CFTC, Robinhood known as off a wider launch of occasion buying and selling organized across the Tremendous Bowl.
KalshiEX’s profitable swimsuit in opposition to the CFTC — in addition to a looser regulatory setting — performs in Robinhood’s favor this go-round. So does the dealer’s rep for undercutting rivals’ charges.
Robinhood clients pay a 1 cent per contract buying and selling fee after they purchase or promote an occasion contract, in addition to a per-contract alternate price (usually 1 cent) and, if relevant, a selection (additionally usually 1 cent), in accordance with Robinhood. For comparability, Interactive Brokers, which launched occasion buying and selling in 2022, fees a flat price of 10 cents per contract.
Entry to occasions buying and selling requires being permitted for a Robinhood Derivatives account and is just obtainable to U.S. residents with a person Robinhood investing account with both choices buying and selling approval (degree 2 or 3) or one which’s margin investing enabled.
Backside line
Betting on the end result of a basketball sport, election or film’s Rotten Tomatoes score will not be investing, even when you’re doing it on a official investing platform. And whereas it’s actually true that there are similarities between choices buying and selling and sports activities betting, sensible gamblers solely play with cash they will spare to lose.
Editorial Disclaimer: All buyers are suggested to conduct their very own unbiased analysis into funding methods earlier than investing determination. As well as, buyers are suggested that previous funding product efficiency is not any assure of future worth appreciation.
