Key takeaways:
- Robinhood is considering entering the prediction market more deeply, conducting talks with Crypto.com regarding the introduction of “yes/no” contracts, which may make it a competitor to Kalshi or Polymarket.
- Analysts see great potential in this segment – Robinhood’s revenues from prediction markets may reach USD 1.7 billion by 2028, and the turnover on the entire market in 2030 may amount to up to USD 1 trillion.
- However, the development of the sector in the USA is hampered by regulatory disputes.
As U.S. prediction companies continue to fight legal battles between state and federal authorities, Robinhood is reportedly considering expanding its services and creating a competitor to Kalshi.
Robinhood wants to enter a new market
This all comes just days after Bernstein analysts raised their price target on Robinhood (HOOD) stock from $130 to $160 per share. All based on the company’s perspectives on predictive markets and tokenized stocks. They predict that Robinhood’s revenue from prediction markets could reach $1.7 billion by 2028.
Although Bernstein in April said that trading volume on prediction markets could reach $1 trillion by 2030, many platforms today face ongoing legal disputes in the United States. Some have found themselves in a legal bind between state and federal authorities. The CFTC claims it has exclusive jurisdiction in this field, which conflicts with what state authorities believe. US regulators are trying to block or restrict the activities of a company like Polymarket.
How exactly does the prediction market work?
Predictive markets platforms like Polymarket work like exchanges where users trade contracts tied to future events. Instead of buying stocks or cryptocurrencies, investors bet on the probability of a specific event – for example, the election result, a central bank decision, the price of an asset on a specific date or the outcome of a sporting event. Each contract usually takes the form of a yes/no question. If the user believes that a given event will happen, he or she buys a “yes” contract; if he thinks it won’t happen – he chooses the “no” option.
The contract price reflects the market’s assessment of the probability. For example, if the contract for the event “Will bitcoin exceed $100,000 by the end of the year?” costs USD 0.70, this means that the market estimates the chance of such a scenario at approximately 70%. If the event actually occurs, the “yes” contract holder typically receives $1 for each share purchased. If the forecast turns out to be incorrect, the contract loses value.
The market mechanism plays a key role – the price is not set by the platform operator, but by users buying and selling contracts. The more people believe in a given scenario, the higher the price of the contract becomes. Thanks to this, prediction markets try to aggregate the knowledge and expectations of thousands of participants, creating a kind of market forecast of future events.
In the case of blockchain-based platforms such as Polymarket, transactions are settled using smart contracts, and users often use stablecoins such as USDC. Once the event is over, the outcome is determined based on pre-determined data sources, and funds are automatically paid to those who correctly predicted the outcome.
