Robinhood Rocks Prediction Markets Industry with Susquehanna Deal

• Robinhood announces plans for independent prediction market offering
• Could be blow to partner Kalshi
• Prediction markets represent one of Robinhood’s fastest-growing businesses

Talk about a Thanksgiving week bombshell. Late Tuesday, Robinhood Markets (NASDAQ: HOOD) rocked the prediction markets industry, unveiling what amounts to be a go-it-alone plan.

The financial services company said it is introducing a futures and derivatives exchange and clearinghouse to broaden its footprint in predictions markets, which have become one of the company’s fastest-growing segments. Susquehanna International Group, a leading market-making outfit, will serve as Robinhood’s initial liquidity provider with other market makers expected to join the fray in the future.

The venture will accelerate delivery of its services by acquiring MIAXdx, a CFTC-licensed Designated Contract Market (DCM), Derivatives Clearing Organization (DCO) and Swap Execution Facility (SEF), and wholly-owned subsidiary of Miami International Holdings, Inc. (MIAX^®) (NYSE: MIAX). MIAX will remain invested through a strategic 10% equity stake in the exchange,” according to a statement.

In plain English, Robinhood is acquiring MIAXdx to obtain the licenses needed to operate prediction markets in the US — a move used by rivals in the space to speed along market entry rather than waiting on regulators to approve permit applications.

Robinhood News Could Be Blow to Kalshi

Robinhood investors like the news as highlighted by the fact that the stock is higher by nearly 11% in late trading. But investors, including venture, that recently pumped privately Kalshi’s valuation to stratospheric heights probably aren’t celebrating Robinhood’s move.

However, Robinhood processed 2.3 billion in event contract trades in the third quarter, more than double the pace set in the June quarter, but even with that “Kalshi bros” remained steadfast in the belief that Robinhood wouldn’t venture off on its own in the prediction markets space.

That’s happening and the news arrived just days after reports surfaced indicating Kalshi raised $1 billion in new financing, vaulting its valuation to $11 billion, or more than double the amount the company was valued at just last month. Looked at another way, investors that got involved with Kalshi at $5 billion and $11 billion multiples likely didn’t account for the possibility of Robinhood doing its own thing in prediction markets though they should have covered that base.

Expect Robinhood to Be Huge in Prediction Markets

With deep technology proficiency and a growing client base that’s wagering/prediction markets-enthusiastic, Robinhood has the ingredients in place to be a dominant event contracts player.

“Prediction Markets have quickly become Robinhood’s fastest-growing product line by revenue. Just one year since launch, 9 billion contracts have been traded by more than 1 million Robinhood customers,” according to the press release. “By introducing a robust, institutional-grade exchange to the market, we’ll add more choices for consumers. We’ll also gain the flexibility to build faster and deliver more contracts and services to traders.”

Some analysts see the US prediction markets industry turning into a five-horse race comprised of DraftKings, FanDuel, Kalshi, Polymarket, and Robinhood.