During the company’s first investor day event, CEO Vlad Tenev confirmed that Robinhood is considering expanding into sports betting through event contracts. Following this news, the company’s stock rose by 3.5%.
“We’re keenly looking into that space. Nothing to announce just yet, but it’s so important to our customers and in culture that we’re excited about it,” Tenev said.
Robinhood started offering event contract wagering in October before the 2024 U.S. presidential election. Event contracts were only available for the election and to the company’s U.S. customers. To gain access to the event wagering feature, you needed to be approved for margin investing and Level 2 or 3 option trading.
How events contracts work
Political betting isn’t legal in the United States, as the Connecticut Department of Consumer Protection explained in the build-up to the 2024 U.S. election. However, several platforms like Robinhood and Kalshi provided event contract predictions for the event with legal approval from the Commodity Futures Trading Commission (CFTC).
Event contracts offer the opportunity to make yes or no predictions about upcoming events and buy stocks in that prediction. You can only back one side of a prediction. For example, you could have wagered on Donald Trump to win last month's election.
Every correct stock prediction earns a $1 payout. So, if you bought 50 stocks for $100 on Trump to win, you’d make $50 profit and walk away with $150.
The system would work the same if Robinhood applied it to sports betting. Bettors could buy predictions in the Kansas City Chiefs to win a game against the Los Angeles Chargers and win $1 for every stock bought if correct.
Event contracts already hugely popular
Thanks to the 2024 election, event contract predictions are already incredibly popular in the U.S. Bettors placed election wagers over $1 million through platforms like Kalshi and Polymarket. During the election period, Kalshi and Polymarket surged to the top of the Apple App Store, taking over from significant platforms like TikTok and Instagram.
Considering how many bettors enjoyed these markets for the U.S. election, trying this form of wagering for sports could be an easy way to attract customers.
However, it’s not all been good news for event contract operators. One of those significant bets on the 2024 election was placed in France through Polymarket and profited the bettor nearly $80 million. Since news of this significant wager broke the headlines, Polymarket has been shut down in France for breaking the country’s gambling laws. Additionally, the FBI recently raided the home of Polymarket CEO Shayne Coplan and seized electronic devices.
Polymarket was not licensed by the CFTC to accept election event contracts, and the United States Justice Department is investigating whether the company accepted trades from U.S. players. However, Robinhood has approval from the CFTC to offer event contracts, so it should not run into the same issues if it expands its offering to include sports betting.
