(Bloomberg\/Emily Nicolle) \u2014 Robinhood Markets Inc. is exploring an expansion of its prediction markets product to countries outside of the US, a move that would broaden the reach of the already fast-growing and often controversial industry.<\/p>\n
The brokerage has been speaking to overseas regulators like the UK\u2019s Financial Conduct Authority about how it might offer prediction markets locally, as demand for the space continues to grow. At issue is how such products might be structured and regulated \u2014 while prediction markets are considered futures products in the US, they\u2019re often lumped in with gambling in other regions.<\/p>\n
\u201cIt\u2019s a swap here in the United States. So the question would be where is swap oversight, let\u2019s say in the UK? That\u2019s a question that we\u2019ve been asking the FCA, how do we work it?\u201d JB Mackenzie, vice president and general manager of futures and international at Robinhood, said in an interview this month.<\/p>\n
The Menlo Park, California-headquartered firm has seen global demand for its prediction markets products, Mackenzie said, citing the UK and Europe as two areas where the firm is seeing increased customer interest. Robinhood\u2019s primary business focuses on equities and cryptocurrency trading, having launched operations in the UK and the European Union in late 2023.<\/p>\n
Betting on prediction markets soared during the 2024 US presidential election, when platforms such as Kalshi and crypto-based platform Polymarket facilitated billions of dollars in wagers on the outcome. Robinhood has viewed it as a source of growth and the proliferation is blurring the lines between financial markets and the gambling industry.<\/p>\n
The brokerage provides the ability to trade prediction-market contracts in the US through partnerships with Kalshi and ForecastEx, which are regulated by the US Commodity Futures Trading Commission.<\/p>\n
\u201cRight here in the United States, this is a federally regulated CFTC product. What we\u2019d have to figure out is what does that mean? Whether it\u2019s in the UK or if it was in the EU or so forth, why are they designated in such a way? And then what\u2019s the regulatory rules for it?\u201d Mackenzie said, referring to possible gambling oversight.<\/p>\n
\u201cWe\u2019re definitely looking to offer it globally, and my goal or focus is to make sure it\u2019s a regulatory-compliant product everywhere we go,\u201d he added.<\/p>\n
Prediction markets have also faced criticism as they\u2019ve grown. Platforms have at times offered markets in ethically gray areas, such as the spread of the California wildfires or the timing of Pope Francis\u2019s death. They\u2019ve also opened themselves up to accusations of abetting manipulation, including most recently on markets that tracked when sex toys were thrown onto basketball courts during WNBA games.<\/p>\n
Robinhood chooses which markets to list from those providers, Mackenzie said, enabling it to avoid those that could be controversial or prone to manipulation. \u201cJust because something goes viral, meaning it hits the various social media platforms, it doesn\u2019t mean that\u2019s something that we\u2019re going to look to offer as a product,\u201d he said.<\/p>\n
The platform has brokered more than 4 billion event contracts \u2014 each contract representing a position taken by a trader on a particular outcome \u2014 since it began offering prediction markets earlier this year, Robinhood Chief Executive Officer Vlad Tenev said in an X post on Monday. Its shares rose more than 12% following the post. The stock was up about 2% to $139.69 on Tuesday.<\/p>\n
While Robinhood started its offering with markets centered on the election, it has since expanded into bets on sports, economics and price volatility for assets like crypto and commodities.<\/p>\n
Overseas expansion may help Robinhood take greater market share at a time when the US prediction markets space is growing increasingly crowded. Polymarket recently acquired an exchange to allow it to serve US customers, while online gambling platform FanDuel and sports gaming firm Underdog began offering markets through their own partnerships. CME Group Inc. said in August it would break into sports predictions \u2014 one of the most popular areas among bettors \u2014 if its partner FanDuel decided to offer them.<\/p>\n
\u2013With assistance from Paige Smith.<\/p>\n