Chapter 1: What is the main topic discussed in this episode?
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Bloomberg Audio Studios. Podcasts. Radio. News. We're going to stay with Robinhood because the company this week rolled out updates to its AI assistant and prediction market offerings. In fact, prediction markets are now Robinhood'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 Robinhood, Vlad Tenev. And my Bloomberg Crypto co-host, Tim Stenevik, 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 sportsbooks. 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. So I think the major innovation here
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Chapter 2: What updates has Robinhood made to its prediction markets?
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 want to make sure we have 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 Robinhood and others too, if they offer enough protections to consumers against addictive betting. How do you solve for that at Robinhood?
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 that actually have strategies. So it's not, you know, it's not as much of 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.
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Chapter 3: How are sports wagering capabilities integrated into Robinhood's offerings?
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 Skydance or neither of the above? And right now, we look at the stock prices, right? And we try to reverse engineer what's happening with the 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 Ledger X. 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 like 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.
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Chapter 4: What distinguishes combination trades from traditional parlays?
If you just look at the trillions that are being used, 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, Kolshe, for example, that is a partner of yours right now, but also a competitor?
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 prediction market exchanges.
And I think that will lead to a great outcome for ultimately the traders in this 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,
Robinhood 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.
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Chapter 5: How is Robinhood expanding its prediction markets beyond sports?
Well, speaking of all financial needs, there's a lot of chatter on Trump accounts for kids where the government seeds investment accounts with $1,000 for children as part of the One Big Beautiful Bill. Are you still positioning yourself for consideration? Have you heard who else might be in the running?
Yeah, well, I've spoken to the president and obviously the government about this personally. And basically, while we can't give you the details of what we're involved in or what we're talking about, I think this is incredibly important. I think we have a huge risk in this country of people not believing in the free markets and in the financial system because they don't have skin in the game.
I think it's especially a problem now when we're in this massive wave of AI-driven disruption. So you're seeing AI products being adopted at an accelerating rate, but at the same time, AI being generally unpopular because people are pretty worried about what impact it's going to have on them and their jobs.
And I think the best way to actually counteract this is from an early age, give people a stake in what's being built in the great industries of this country. So I think it's a great initiative and we've assured them that we're standing ready to help in the maximal way possible.
To Scarlett's point, Ray Dalio's going to donate to Trump accounts in Connecticut. BlackRock is going to match Trump account contributions for employees. A lot of companies are wondering if their companies are going to do it. Any plans to do that for Robinhood employees?
I think we're thinking of a lot of things. And what I'm mostly interested in is, you know, obviously not to downplay Robinhood has thousands of employees. But I think our value is we serve tens of millions of customers in the U.S. And we've got, you know, over a third of a trillion in assets on the platform. So, yeah.
we're sort of like thinking bigger, like how can we help every single company and every single individual in this country plug into the system? Of course, we're interested in thinking for our employees, but the impact of that is like relatively low when it comes to the whole country. And we're really thinking about how can we help the whole country and this program be as successful as possible.
Hey Vlad, before we let you go, I want to talk a little more about the Cortex AI offering and what you're trying to build in this financial super app at Robinhood. If you think about this from the perspective of, and you made clear you don't want this to be an advisor by any means, but you want people to be able to ask questions to the app about different stocks or help find stocks.
How is it powered? What is the AI that powers Cortex AI? How is it trained and what's the underlying model that you're using?
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