Robinhood CEO Vlad Tenev has a lot to celebrate this holiday season. After a bumpy few years following Robinhood’s 2021 IPO — a period during which the commission-free trading app’s stock plunged more than 90% after it abruptly limited trading to some meme stocks — the 12-year-old company just announced Yahoo Finance “comeback stock” of the year.
Asked about that assessment in recent days on Zoom, Tenev was glowing. “When we were a new company and just starting out, everyone was rooting for us,” said Tenev, who oversees about 2,500 employees at Robinhood. “Then at some point we started being treated like a task… the atmosphere became negative, (and) during COVID, it just became weird. (We) were growing like crazy, but people were unhappy, and we went down, and now it’s been very positive.”
However, it’s what’s up close that has Tenevi really excited. Like many fintech entrepreneurs, he feels very enthusiastic about a second Trump administration, given that deregulation appears to be a priority, along with a much warmer embrace of cryptocurrency.
Unsurprisingly, it plans to capitalize on the rapidly changing landscape. Indeed, during our conversation, we talked about “explosive” job offers and about cryptocurrencies. We discussed copy trading, a trading strategy that allows clients to automatically replicate the trades of another trader. We also talked about prediction markets, where Robinhood plans to increasingly compete with still-private startups like Kalshi and Polymarket, which are focused squarely on letting people bet on the outcome of future events.
You can all listen to it here; Meanwhile, below, you can find special excerpts related to prediction markets. These excerpts have been lightly edited for length.
I’m seeing that one in 10 Americans (with brokerage accounts) have a Robinhood account, yet you only have a quarter of a percent of the total retail assets in the United States. Can this be right?
I haven’t heard that statistic. I mean, it doesn’t sound crazy to me. There are trillions (of dollars) of assets (in the world). Robinhood’s (AUM) is around $200 billion, so we still have a long way to go. We’re bigger than when we started, but some of these people, like the Schwabs and Fidelitys, have $10 trillion in assets. So we’re still growing, but our assets are growing 40% plus year over year, instead of 2% to 3%.
When we last sat down in person, this was a much smaller company with ambitions to become a financial services giant; you have since taken on wealth management and credit cards. I’m wondering about some newer financial mechanisms, like prediction markets; how big a chance do you think?
I’ve been a big fan of prediction markets for a long time, and it became clear to me relatively early on that political contracts are the ideal product in that space because (politics) is so valuable and highly correlated with market performance. , so useful as protection.
Another thing was: Everyone looks at the polls and the early results on election night to figure out what’s going on, and if you’re watching the news, the picture they paint is pretty bleak, isn’t it? They’re doing all this math for you and they’re tabulating (the votes), but they’re not telling you what the chances are that one candidate or the other will win the election. You contrast that with prediction markets … and I think what’s even more powerful is just the distillation of where things stand right now, based on all the information that’s out there. And that’s a very useful use case, not necessarily for forecasting itself, but really for news. If you want information as soon as possible about what is actually happening, I think prediction markets are really good.
We didn’t think it would be possible to launch (our presidential election market) for this election because there was a lawsuit with the (Commodity Futures Trading Commission, or CFTC), then Kalshi prevailed at the 11th hour (to offer contracts that pay off as bets on US political elections), the team mobilized. We put a lot of great people into it and went from aiming to actually launching shipping in about two and a half weeks, which was crazy and speaks to the culture and product philosophy we’ve built at Robinhood.
Have you ever spoken to Kalshi about the possible acquisition?
I talked to Kalshi, not to buy him. We ended up working with ForecastEx (a CFTC-registered designated contract market (DCM) for forecast contracts). And, this is a little technical, but we’re an FCM, a futures commission merchant, which is kind of like the client-facing part of a futures dealer or exchanges, and so we have to rely on an exchange functionally. to serve as the back end of all these trades. And we ended up using ForecastEx because they had all the license to be able to do that. My understanding is that Kalshi is only able to offer it retail directly, not able to service other FCMs.
I have read that you have shown that a movement in sports can also take the form of event contracts.
I think this is taken a bit out of context. Of course, our focus is on federally regulated event contracts rather than traditional sports betting. Right now, event contracts do not allow for sports results (but) that may change.
You know, there’s going to be a new CFTC Commissioner (and) a lot of people are interested in getting sports into the federally regulated arena. I think these products would look very different from traditional sports betting. But yes, our focus is on event contracts. I think this will be a big thing. The presidential election market proved to us that there is a lot of demand for these types of products. We had over half a billion contracts traded in about a week (by more than) half a million people. And so I think the number one thing we were hearing afterwards was: Can we have more contracts? Could this be a more fleshed out product and not just for the election?
Clearly, the sport would be big and permanent. What other types of contracts are you envisioning?
There are many possibilities. A natural fit for Robinhood is economics. You can see some examples of, you know, a Fed hike, a Fed decline … anything that’s at the intersection of news and financial markets is interesting to us. In my opinion, news is increasingly becoming merged with entertainment.
There are two ways to view (event contracts). One is like an active trading asset, that active traders like to trade along with options and futures and stuff. But the other is like a passive experience, where if you just want news, event contracts can be a way to deliver that to you in real time. We’re thinking about that as well, and I think that opens up a wider set of possibilities. I mean, you can have event contracts for almost anything, from the Oscars and entertainment events to sports to politics. And the categories of event contracts almost become like the columns of a newspaper, don’t they? Art, style, leisure, sports, business, front page, which is in real time. So you can imagine the digital equivalent of a newspaper that is distributed through event contracts.
Again, for much more with Tenev, you can tune in here.
