[The Editors' Verdict] The Future of 'Prediction Trading'

Robinhood Enters Prediction Market Through Stock App
New Betting Services Poised to Transform Investment Paradigm

Is there anything more thrilling than a 'money bet'? When major sports events like the World Cup or the Olympics take place, groups of three to five people in offices often make 'ten-thousand-won bang' bets on the game results. There is a company that is starting such betting services through a stock trading application (app). The company in question is Robinhood, a U.S. financial platform firm. On the 17th (local time), the company announced that it would enter the 'prediction market' by partnering with a company called Kalshi. They plan to engage in so-called 'prediction-based event trading.' The reasoning is that whether it's sports betting or election results, if there is sufficient data for analysis, it is no different from regular futures and options products.

Robinhood is famous for successfully popularizing financial products. Robinhood app users trade stocks as if playing a game. When buying stocks, fireworks explode on the phone screen, and there are events where users scratch virtual scratch cards on the screen and win Tesla shares. Their excellent gamification has greatly influenced domestic internet banking services like Toss. Kalshi is a company that provides 'decentralized prediction event trading' services, an online exchange where you can bet on everything from 'weather' to 'politics.' Together with Kalshi, Robinhood is preparing various prediction trading products such as predicting the national college basketball championship team next month or the Federal Reserve's benchmark interest rate in May. The new prediction trading will also be available through the existing app.

The two companies have already done a 'test run.' Early last month, Robinhood announced an event in partnership with Kalshi to predict the Super Bowl winner, but the banner was taken down after one day due to sanctions from the U.S. Commodity Futures Trading Commission (CFTC). The reason was that the commission had not yet conducted a risk management assessment for the event. Nevertheless, just one month after withdrawing the event, Robinhood launched a similar service. Where does this confidence come from? It can be inferred by looking at recent appointments by the U.S. government. On the 12th of last month (local time), one week after the Super Bowl event withdrawal, President Donald Trump appointed Brian Quintenz as the next chairman of the CFTC. At that time, Quintenz was a board member of Kalshi. Also, in January, Donald Trump Jr., the president's eldest son, joined Kalshi as a strategic advisor. This suggests how the government views prediction event trading.

Can Robinhood's bold challenge provide value as a differentiated financial service? Let's temporarily set aside the predictable answer of 'promoting gambling addiction' and focus on the flow of money. There are three points to watch closely. First, consumers recognize this service as a new investment product. In a recent survey of Robinhood app users asking whether they would use the service, 78% responded "yes." Second, concrete steps to break down the boundaries of financial products have begun, led by innovators. Third, it is encouraging that Wall Street wolves, attracted by the scent of money, are flocking. Robinhood has been expanding its presence in emerging asset classes, including cryptocurrencies and derivatives, over recent years. Last year, Robinhood's stock price rose 150%, and it surged 15% in one week around the announcement of the prediction trading service launch.