This week’s presidential election introduced a lot of people to prediction markets.
Kalshi was the number one app in the App Store on Election Day. The CEO of Polymarket claims the Trump campaign first realized they were winning from his startup’s stats, which showed them winning by a landslide hours before news networks called the race. There’s a sense in some tech and finance circles that these betting markets are now a better “wisdom of the crowd” indicator than polls.
Robinhood joined the fray just in the nick of time. A week before the election, the company announced that its first-ever prediction market would be for the presidential race between Kamala Harris and Donald Trump. It turned out to be a massive hit, with over half a billion bets placed. Now, CEO Vlad Tenev sees a future where Robinhood’s millions of users can bet on all kinds of things, including the performance of the stocks they trade on the platform. He thinks the broader interest in prediction markets reflects a growing “distrust of traditional news” that’s rewiring how people seek information about the world.
“It’s the fastest way to get information about what’s happening,” Tenev told me in an exclusive interview after Election Day. “You saw this on the news on election night. The networks didn’t call states until hours after the results were relatively clear in prediction markets. So you have an option: if you want to know what’s going on in the election, you can either watch the networks and listen to people debate and try to make sense of who’s winning, or you can open up Robinhood and look at what’s happening.”
Below, Tenev and I chat about why he’s bullish on prediction markets and where he sees Robinhood leaning into them more. We also talk about how election betting became legal in the US just in time for the election, why he thinks a Trump administration will be good for crypto, and more.
The following conversation has been edited for length and clarity
Why did you decide to launch a prediction market for this election?
I’ve been interested in prediction markets for a very long time. I think that prediction markets have been a source of real-time information about what’s actually happening.
I have this tweet that I think reflects how I feel about the whole situation. Over the past 10 years, news has shifted more into the realm of entertainment. The goal is less to inform and more to attract and entertain. That comes at a cost of getting the information out directly and as clearly as possible. I think that has led to a lot of distrust of traditional news over time.
Prediction markets have this property that people have real skin in the game. They reflect new information coming in much more quickly. In 2016, and even more so in 2020, you saw that happening and prediction markets being a bigger part of how people track the elections.
The court case the CFTC [US Commodity Futures Trading Commission] lost about a month ago paved the way for us to be able to offer this product. We did not think the chances of that were high. When we saw that happen, we got the team together, and we were like, “If we can offer this, this is a once-in-a-lifetime opportunity to create a new innovative product and offer it to customers.”
It took a lot of hard work to be able to deliver this in less than a month. We’re a futures commission merchant regulated by the CFTC, and we built that in the hopes of offering broad event contracts but also future outrights, which we announced at Hood Summit in Miami. So we had done all this work, gotten the regulatory approvals for it, built the infrastructure. It was almost like this opportunity arose in precisely the window that we could actually do something about it to offer this product and capitalize on it relatively quickly.
Why were you surprised by the CFTC ruling?
Nobody thought that this was going to happen by the 2024 election. The saga has been playing out for over a decade. So the odds of it materializing with a month left to the 2024 election just seemed minuscule.
You all called prediction contracts a “new asset class” in your announcement. Where do you think the consumer demand for this is coming from? The CEO of Kalshi told Wired they were trending higher than Pornhub on Google Trends this week.
It’s one simple thing: it’s the fastest way to get information about what’s happening. You saw this on the news on election night. The networks didn’t call states until hours after the results were relatively clear in prediction markets. So you have an option: if you want to know what’s going on in the election, you can either watch the networks and listen to people debate and try to make sense of who’s winning, or you can open up Robinhood and look at what’s happening.
I think that’s why, if you looked at the trading volume, it really spiked and increased around the times that new information entered the market, particularly on election night. I think the reason they’re popular is that this is the most efficient way to process information and make sense of it.
Does any part of you worry that it’s also a way to manipulate races or other things that people are betting, that it’s not just a reflection of reality but something that can actually contort these processes?
I think that’s where the benefit of being a regulated platform comes in. If you’re operating under CFTC regulation, there are pretty strict rules on surveillance and monitoring.
We know exactly who’s making what type of trade, as opposed to if you’re an offshore platform not open to American citizens. I have a lot of respect for Polymarket and what they’ve built, but they are an offshore platform that’s not open to US citizens. I think they’re consequently subject to fewer rules.
Is there going to be a continuous live prediction market for all kinds of things in Robinhood?
I do think that prediction markets can actually help address some of the shortcomings that people have about getting clear information from news sources. You probably know this better than anyone, since you’re living it and breathing it, but a lot of this is going to user-generated content. X is beating that drum.
Prediction markets and actual news integrating with markets, I think, is going to be a big thing. Robinhood lies in the middle...
