Robinhood CEO Vlad Tenev has quite a bit to have fun this vacation season. After a bumpy few years following Robinhood’s 2021 IPO — a interval throughout which shares of the commission-free buying and selling app plummeted by more than 90% after it abruptly restricted buying and selling in some meme shares — the 12-year-old firm was simply declared Yahoo Finance’s “comeback stock” of the year.
Requested about that accolade in latest days over Zoom, Tenev was beaming. “After we have been a younger firm and simply obtained began, everybody was form of rooting for us,” stated Tenev, who oversees roughly 2,500 staff at Robinhood. “Then at one level we began being handled as an incumbent … the vibe turned adverse, [and] throughout COVID, it simply turned unusual. [We] have been rising like loopy, however folks have been sad, and we hit our low, and now it has been very optimistic.”
It’s what’s across the nook that has Tenev really excited, nevertheless. Like a variety of fintech entrepreneurs, he’s feeling very enthusiastic a couple of second Trump administration, on condition that deregulation seems to be a precedence, together with a far hotter embrace of cryptocurrency.
Unsurprisingly, he plans to make the most of the fast-changing panorama. Certainly, throughout our chat, we talked about “exploding” job provides and about crypto. We mentioned copytrading, a buying and selling technique that enables purchasers to robotically replicate the trades of one other dealer. We additionally talked about prediction markets, the place Robinhood plans to more and more compete with still-private startups like Kalshi and Polymarket which can be squarely centered on permitting folks to guess on the result of future occasions.
You possibly can hearken to the entire thing here; in the meantime, beneath, you could find excerpts particularly pertaining to prediction markets. These excerpts have been edited frivolously for size.
I’m seeing that one in 10 Americans [with brokerage accounts] have a Robinhood account, but you solely have 1 / 4 p.c of the entire retail belongings in the US. Can that be proper?
I haven’t heard that stat. I imply, it doesn’t sound loopy to me. There’s trillions [of dollars] of belongings [in the world]. Robinhood’s [AUM] is correct round $200 billion, so we’ve nonetheless obtained an extended methods to go. We’re larger than after we began, however a few of these guys, just like the Schwabs and the Fidelitys, have $10 trillion in belongings. So we’re nonetheless rising, however our belongings are rising 40% plus yr over yr, reasonably than 2% to three%.
After we final sat down in person, this was a a lot smaller firm with ambitions to turn out to be a monetary companies large; you’ve since gotten into wealth management and credit cards. I’m questioning about some newer monetary mechanisms, like prediction markets; how massive a chance is there, do you suppose?
I’ve been an enormous fan of prediction markets for a very long time, and it turned clear to me comparatively early on that political contracts are the perfect product in that house, as a result of [politics] could be very newsworthy and extremely correlated to market efficiency, so helpful as a hedge.
The one different factor was: Everybody watches the polls and early outcomes on election night time to determine what’s occurring, and if you happen to’re watching the information, the image they paint could be very unclear, proper? They’re doing all this math for you and tabulating [votes], however they’re not likely telling you what the percentages are of 1 candidate or the opposite successful the election. You distinction that with the prediction markets … and I feel what’s much more highly effective is simply distilling the place issues stand proper now based mostly on all the knowledge that’s on the market. And that’s a really helpful use case, not essentially for prediction itself, however actually for the information.
We didn’t suppose it’d be potential to launch [our own presidential election market] for this election as a result of there was the lawsuit with the [Commodity Futures Trading Commission, or CFTC], then Kalshi prevailed within the eleventh hour [to offer contracts that pay off as bets on U.S. political elections], and the staff mobilized. We put a variety of nice folks on it, and we went from meaning to launch to really transport in about two and a half weeks…
Did you ever discuss to Kalshi about probably shopping for it?
I’ve talked to Kalshi, not about shopping for it. We ended up working with ForecastEx [a CFTC-registered designated contract market (DCM) for forecast contracts]. And, it is a little bit technical, however we’re an FCM, a futures fee service provider, which is form of just like the customer-facing a part of a futures or swaps supplier, and so we have to depend on an change functionally to function the again finish of all these trades. And we ended up utilizing ForecastEx as a result of that they had all of the licensure to have the ability to try this. My understanding is that Kalshi is simply in a position to supply it to retail instantly, not in a position to serve different FCMs.
I learn that you simply’ve indicated a transfer into sports activities may take the type of occasion contracts, too.
I feel that was taken a bit of bit out of context. Definitely, our focus is on federally regulated occasion contracts reasonably than conventional sports activities betting. Proper now, occasion contracts don’t allow sports activities outcomes [but] that may change.
You already know, there’s going to be a brand new CFTC Commissioner [and] lots of people are curious about sports activities getting into the federally regulated realm. I feel these merchandise would look very completely different from conventional sports activities betting. However yeah, our focus is on occasion contracts. I feel that’s going to be an enormous factor. The presidential election market proved to us that there’s a variety of demand for a majority of these merchandise. We had over half a billion contracts traded in a couple of week [by more than] half one million folks. And so I feel that the primary factor we have been listening to afterward was: Can we have now extra contracts? Can this be a more-fleshed-out product and never only for the election?
Clearly sports activities can be enormous and perennial. What different varieties of contracts are you imagining?
There’s a variety of prospects. A pure match for Robinhood is financial ones. You possibly can see some examples of a Fed hike, a Fed drop … something that’s on the intersection of reports and monetary markets is fascinating to us. In my view, information has more and more began to merge with leisure.
There are two methods to have a look at [event contracts]. One is as an energetic dealer asset, that energetic merchants wish to commerce alongside choices and futures and different issues. However the different is as a passive expertise, the place, if you happen to simply need the information, occasion contracts is usually a strategy to ship that to you in actual time. We’re additionally fascinated by this, and I feel that opens up a broader set of prospects. You possibly can have occasion contracts on just about something from the Oscars and leisure occasions to sports activities to politics. And the classes of occasion contracts nearly turn out to be just like the sections of a newspaper, proper? Artwork, model, leisure, sports activities, enterprise, [the] entrance web page, which is actual time. So you’ll be able to think about the digital equal of a newspaper being delivered by way of occasion contracts.
Once more, for way more with Tenev, you’ll be able to tune in here.
