Robinhood Sees Prediction Markets Evolving Beyond Sports

• Brokerage firm aiming to be a prediction markets leader
• Company could build-out prediction platform with wider-ranging institutional capabilities
• Analyst says international expansion could be in the cards

Robinhood Markets (NASDAQ: HOOD) is aiming to be a prediction markets while expanding its yes/no derivatives platform beyond its current sports-centric state.

Following meetings with Robinhood Vice President & General Manager of Futures & Prediction Markets JB Mackenzie, Deutsche Bank analyst Brian Bedell chimed in on the company’s wide-ranging prediction markets plans.

We see HOOD aspiring to be a leader in prediction markets from a multi-dimensional perspective, including retail usage (and integration into HOOD’s wide product array), a high volume and multi-product exchange vertical, leading market making capabilities, and a longer-term institutional capability focused on event contracts over a wide array of uses, along with longer-term international ambitions,” observes the analyst.

He rates shares of Robinhood “buy” with a $121 price target, implying upside of 75% from where the stock closed on March 24.

Robinhood Wants to Go Beyond Sports Event Contracts

Estimates vary, but multiple data sources confirm sports event contracts account for an outsized portion of turnover on yes/no exchanges and that’s almost certainly true on Robinhood, which serves a largely retail client base comprised of active traders, many of whom are also sports bettors.

“Although management strives to continuously enhance its sports offerings, mgmt. believes the market will evolve well beyond sports over time, with a focus on investment-oriented financial/economic/macro contracts, which we agree will be a major evolutionary driver for the industry,” he adds.

Some experts see other segments, including cryptocurrency prices, culture, economic forecasting, and politics, as pivotal to prediction markets’ growth, and vital regarding reduced dependence on sports event contracts.

Robinhood’s Non-Sports Evolution Will Take Time

Prediction markets represent one of the company’s fastest-growing segments, but much of that growth has predictably been driven by sports derivatives, indicating investors may have to be patient as Robinhood attempts to woo traders to yes/no contracts beyond sports. Bedell believes the company has the ability to accomplish that objective over time.

“While the non-sports side will take time to evolve, we remain constructive on management’s execution of this product roadmap, and reiterate our Buy rating, with HOOD being our top growth pick in the online brokers,” concludes the analyst.

Some analysts previously stated that as the US prediction markets industry matures, it’s likely to be a five-horse race dominated by DraftKings, FanDuel, Kalshi, Polymarket, and Robinhood. Bedell did not opine on the state of Robinhood’s relationship with Kalshi. Last November, the brokerage firm announced a partnership with Susquehanna International Group, a leading market maker, indicating it could pursue a go-it-alone approach in the space.