Robinhood’s stock experienced a substantial jump of 8% on Wednesday following the announcement of an expansion in its rapidly growing prediction market segment. The online trading platform revealed plans to launch a new futures and derivatives exchange in partnership with market maker Susquehanna International. This strategic move aims to enhance its prediction-market offerings where users can wager on various outcomes, including sports results and decisions made by the Federal Reserve regarding interest rates.
Robinhood initially introduced prediction market services last year in collaboration with Kalshi. Since then, the platform has facilitated trading of an impressive 9 billion contracts, attracting over 1 million users. Analysts from Bernstein noted that while Robinhood is likely to maintain its distribution of Kalshi products, the new initiative will enable direct access to a broader array of event contracts.
As evidenced by its stock performance, Robinhood has gained 215% year to date, positioning it as the second-largest gainer on the S&P 500 index this year. Following the addition of Robinhood to the index in September, it has become a focal point for investors.
Bernstein analysts underscored that with Robinhood now handling more than 50% of market volumes from Kalshi, the company is strategically positioned to leverage its distribution advantage to capture a greater share of market revenue. They have issued a Buy rating for Robinhood stock, setting a price target of $160.
The firm emphasized that Robinhood’s active trader base, which boasts 14 million users, aligns perfectly with the target demographic for prediction markets. This positions the platform to make significant inroads in market revenue, with Bernstein estimating potential annual earnings exceeding $300 million from event contracts.
Under the new agreement, Susquehanna International will serve as a liquidity provider, a crucial component for ensuring price stability in trading. Robinhood expressed confidence that the introduction of an institutional-grade exchange would not only diversify consumer options but also improve its operational efficiency, enabling the company to introduce new contracts and services to traders more rapidly.
With these developments, Robinhood continues to make significant strides in the financial technology landscape, thus reshaping how users engage with prediction markets.
