Robinhood CEO Vlad Tenev Talks Prediction Markets | Bloomberg Talks

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0:02 Bloomberg Audio Studios.

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0:08 Robinhood reported earnings recently and showed

0:10 that its revenue from its crypto segment falling,

0:13 but some of that is shifting to its prediction markets business.

0:16 The platform saying that the annualized

0:17 revenue from its event contracts were about $415 million in the first quarter

0:23 compared to crypto's implied $536 million pace.

0:27 Vlad Tenev is here.

0:28 He's chairman and CEO of Robinhood and he joins us now on set.

0:30 Vlad, always always good to see you.

0:33 Um, prediction markets revenues, as I mentioned,

0:35 now bigger than that from stock trading.

0:37 The business did not exist just a few quarters ago.

0:40 When does it overtake crypto revenues?

0:43 And that that's a good point.

0:44 It's a very new business for us.

0:46 It's nascent as an asset class.

0:49 Prediction markets really entered the mainstream in the 2024 election,

0:54 which is when we launched our offering.

0:56 And I think we're just at the beginnings of this of this new asset class.

1:02 Does it become the biggest business?

1:04 Well, I don't really think about it that way.

1:06 So, Robinhood is a financial super app.

1:09 We're striving to serve all of our customers' financial

1:12 needs across every asset class and every financial transaction worldwide.

1:17 So, um, I think there's plenty more room to run,

1:21 but there's also plenty of room to run in our other business lines.

1:25 We have 11 lines of business generating a hundred million in revenue

1:29 or more uh per year with with plenty more on deck.

1:33 Well, and and we're going to get to more on crypto,

1:35 but I do want to stick with prediction markets for a second

1:37 because it's it's kind of like what everybody is talking about right now.

1:40 It's a big part of our, in fact, it's a big part of Bloomberg crypto now.

1:43 Um, how much is sports related on the platform because

1:48 our Bloomberg Intelligence team uh does an analysis of Kalshi, for example.

1:52 They say 80 to 90% roughly of the of the activity on Kalshi is sports related.

1:56 How much of that is sports related on Robinhood?

1:58 Yeah, it's a big chunk of it for sure, but we are seeing uh north We're

2:03 we're seeing non-sports contracts continuing to gain share.

2:09 And uh sports is just easily understandable, right?

2:13 You're seeing prediction markets uh being

2:17 a disruptor and an alternative to traditional sportsbooks.

2:21 And there's already an established behavior there,

2:24 whereas general event trading it is a little bit newer.

2:28 It's harder for some customers to wrap their heads around.

2:32 We do a lot to to educate customers on that.

2:36 But we see it growing and in fact, as as the product matures,

2:40 we see a world where actually non-sports eventually overtakes sports.

2:46 I'm still going to stick with prediction markets.

2:48 It's just too interesting.

2:49 So, is Robinhood you're partnering right now on infrastructure,

2:52 but is the goal for Robinhood to have

2:53 its own integrated prediction market exchange and clearing system?

2:57 We did announce a joint venture with Susquehanna,

3:01 which is one of the leading market makers, to launch Rothira.

3:05 So, we we acquired LedgerX, if if you're familiar, um Yes.

3:09 which is a a long-established uh futures DCM and DCO.

3:14 And uh that actually is going to go live this quarter.

3:17 So, so for a while we've been partnering

3:19 with third parties to provide the exchange and clearing infrastructure,

3:23 but now we have a a vertically integrated stack later this quarter.

3:27 So, what role will Kalshi play in Robinhood's

3:30 ecosystem once you fully launch that one?

3:32 They would be an alternative exchange provider along with ForecastX.

3:37 And who knows, we might also integrate with more exchanges.

3:41 Really what we're looking for is how do we give customers choice and flexibility

3:46 and give them the best pricing and the best access to contract selection.

3:51 Any names in your list other than Kalshi that you're looking to tap?

3:54 I mean, I think we've had conversations with all of the with all

3:59 of the players in I I should also say on the Rothira side,

4:03 a lot of people are interested in coming to Rothira as well because

4:07 uh they know Robinhood brings a lot of distribution, a lot of usage.

4:11 So, we we've been hearing from, you know,

4:14 folks that want to integrate with Rothira at launch.

4:17 And they see the combination of Robinhood and SIG as uh

4:22 a very very strong one to bring liquidity into the market.

4:25 You know, I've I've I've I've spoken quite

4:27 a bit about prediction markets with other CEOs,

4:29 like Walt Bettinger of Schwab, for example.

4:31 They don't offer prediction markets right now and he's

4:33 told me that when and if they do offer,

4:36 they don't want to offer sports because he sees that as gambling.

4:40 And he doesn't see that as being aligned with with the own

4:43 his own financial services and what he's doing at at his firm.

4:46 What would you say to critics who say, "Well,

4:49 maybe we understand prediction markets and event-based contracts

4:52 on the economy and and certain other parts,

4:54 maybe oil prices, but what we don't see sports fitting

4:58 into financial services." What would you say to those critics?

5:00 I mean, I think the reality of it is sports is a big part of the economy.

5:06 A lot of money is spent in sports, an increasing amount.

5:09 And I think in particular with the potential

5:13 automation that we see happening from AI,

5:15 sports is one of those things that is continuing to be human.

5:21 You don't really want to watch self-driving cars circling a track.

5:24 It's it's less uh entertaining.

5:26 So, I think sports is actually big business

5:30 and it's a critical part of the economy, much more so than even 20 years ago.

5:35 When you look at these franchises catching, you know,

5:38 10 billion plus valuations, um it's increasingly global.

5:43 So, the two worlds are starting to converge.

5:47 And um yeah, I I think this this new asset

5:51 class is going to continue to grow and and develop.

5:55 And I think, you know, a lot of competitors historically,

5:58 you saw this with crypto, right?

6:00 They sort of dismissed the asset class.

6:03 Um and then eventually you'll hear the uh

6:06 the story shifting to, "Okay, well, yeah, we'll we'll offer it,

6:10 but only in these ways." And then eventually the story becomes, "Well, you know,

6:14 overwhelming demand from from our customers and and um and and now we're

6:20 offering it and we have to compete with uh with with, you know,

6:24 where our customers are are going.

6:26 So, [snorts] I I'd imagine it's the same thing and it's it's

6:30 it's hard for the incumbents to build and launch new stuff.

6:33 So, at first, while they're trying to figure out how to build it,

6:36 they tend to take on a more uh defensive posture sometimes.

6:40 I I wish we could talk prediction markets,

6:42 but I have to ask you about Trump accounts.

6:43 Can you explain briefly and maybe succinctly

6:46 because we have a ton more questions.

6:48 Um how are you working with BNY and Treasury?

6:50 What exactly is Robinhood doing versus

6:52 BNY versus Treasury to administer Trump accounts?

6:56 Yeah, sure.

6:56 So, Trump accounts, for those that might not be familiar,

7:00 it's uh a brokerage account from birth for every

7:04 newborn seeded with a thousand dollars by the Treasury.

7:07 And Robinhood was chosen in partnership with BNY,

7:11 Robinhood is going to be uh the sole

7:14 initial trustee and broker for the Trump accounts,

7:16 which means we're not only uh designing and building the Trump accounts app,

7:23 which the aspiration will be is is it's it's going

7:25 to be the best product that the government's ever been associated with.

7:28 That's what we hope for um and what

7:30 we're building with with the National Design Studio.

7:33 But we're also the broker.

7:34 So, the the accounts and the assets are

7:36 going to be custodied uh custody with us.

7:39 And BNY, the storied oldest uh bank in the US,

7:43 is serving as financial agent and national infrastructure manager.

7:48 Would parents be able to roll over those funds to another brokerage?

7:51 Yeah, eventually there there will be rollovers.

7:54 So, you'll be able to Do you have accounts to the brokerage of your choice.

7:58 Uh there's no firm date on that.

8:00 Everyone's eyes are on the July 4th launch and just making sure

8:05 that the Trump accounts app and the initial

8:07 experience is is just really top-notch.

8:11 You flagged some significant cost in relation to this program.

8:14 Can you explain how the benefits outweigh the cost of this?

8:18 Yeah, so there was a lot of confusion on this.

8:20 Um I'm glad that I have a chance to address it.

8:23 So, we we announced at earnings that there's going

8:25 to be a hundred million cost with developing the Trump accounts.

8:29 So, not all of that has been incurred already,

8:31 but that's what we anticipate uh it it will be and it will be profitable for us.

8:36 So, we this is uh we're serving as a government

8:39 subcontractor and it's on a cost plus basis.

8:43 So, we're kind of billing for the costs.

8:45 And and really the cost comes from the fact that uh the US government

8:49 wants these accounts and the service to be

8:53 handled really really well by humans, right?

8:55 So, we have to staff up significant servicing because,

8:59 you know, there's 5.5 million children that have signed up already.

9:03 There's 70 million children under the age of 18 in this country.

9:07 So, we've got to be ready to scale up to tens

9:09 of millions of accounts relatively quickly

9:11 with like top-notch support and reliability.

9:14 Hey, Vlad, one more before we go.

9:16 Uh Coinbase today cutting 14% of staff and cites volatile markets,

9:20 AI, PayPal, Block, crypto.com, they've had layoffs.

9:24 What what does that say to you about the industry right now?

9:27 I mean, I I I don't know what is

9:29 going on in the internals uh of of other companies.

9:33 I think that Is it AI related or is it crypto related?

9:38 I'm I'm not sure.

9:39 Maybe it's a combination of of both.

9:42 I think that the timing, of course,

9:43 is notable right in the right in the thick of earning season.

9:48 Um but I I can't really share more than that.

9:51 Um Vlad, we wish we had more time.

9:54 Always love catching up with you.

9:55 Always a pleasure.

9:56 Thanks so much for joining us.

9:57 Vlad Tenev, he's chairman and CEO of Ro-