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- [00:00]
Indiana University Narrator
Old playbooks won't solve tomorrow's problems. Indiana University is proving how higher education can create solutions with industry. Our partnerships address future talent and workforce needs, support entrepreneurs and local businesses, and create solutions that turn discoveries into dollars. Together, we're building a model for industry partnerships that fuel economic growth. Explore IU's impact at iu.edu impact.
- [00:29]
Bloomberg Host
Bloomberg Audio Studios Podcasts Radio News we're going to stay with Robinhood because the company this week rolled out updates to its AI assistant and prediction market offerings. In fact, prediction markets are now Robinhood's fastest growing product line by revenue, with analysts at citizens expecting fivefold growth by 2030. So joining us live on the heels of that announcement is the CEO of Robinhood, Vlad Tenev. And my Bloomberg crypto co host Tim Stanwick joins us now as well. Vlad, it's great to speak speak with you. And I want to start with these sports wagering capabilities that you've added to your suite of offerings here. These preset combination contracts for professional football games, NFL games. It sounds like this is your version of parlays that are offered by traditional sportsbooks. So what is the difference between a combination trade and a parlay?
- [01:21]
Vlad Tenev
Yeah, so as you mentioned, this is part of our big unveil of prediction markets which we've offered for a little bit over a year. But remember, we started with just one prediction market on the platform, which was the presidential election in 2024. And since then we've gone to over 1500 contracts on the platform across pretty much every domain. We've got politics, we've got world affairs, economics, culture, and we recently added weather and of course, as you mentioned, sports. So I think the major innovation and why it's been so disruptive to the sports industry is you can take the general prediction markets infrastructure, which are markets that trade on regulated exchanges where buyers and sellers are matched, and apply them to pretty much everything. Now of course sports is an important subset of that because there's an existing large market there. But we see a world where we're actually the percentage of non sports contracts grows much faster than than sports. And I think several big industries are likely to be disrupted in the future. Things like insurance, you can imagine with the weather contracts we have on a platform. People have already pointed out that, you know, trading and hedging with the insurance weather contract is could be superior to buying traditional insurance through a broker. So as the market matures and you see increased in institutional participation, think we could be at the very beginning of a prediction market super cycle with growth in Volumes and enlisted contracts accelerating from here?
- [03:15]
Bloomberg Host
Well, we've had a few incidents now of alleged insider trading in prediction markets. Do you think insider trading poses a risk to fairness in prediction markets, or could it help ensure market accuracy by allowing those with privileged information to participate?
- [03:33]
Vlad Tenev
Well, I'm not exactly sure which incident you're referring to. There was an incident in the sports betting space which is entirely differently regulated. Right. Those are regulated on a state by state basis. And I think they're obviously working hard to address these issues. But what I tell you is financial markets have had the infrastructure in terms of surveillance and monitoring to deal with these types of concerns, and they've been dealing with it for decades because obviously insider trading originated as a market integrity measure for the equities market. You know, we want to make sure we have protections as an industry to make sure corporate insiders and other folks weren't using their privileged information about what a company was going to release to trade ahead of that disclosure being available publicly. So this has pretty much always been a financial market system thing. And so I think financial markets have the best tools to, to deal with it.
- [04:39]
Bloomberg Co-Host Tim Stanwick
Vlad, I'm wondering about prediction markets and specifically Robinhood and others too, if they offer enough protections to consumers against addictive betting. How do you solve for that at Robinhood?
- [04:52]
Vlad Tenev
I mean, I think our, our philosophy is if you look at prediction markets, there's a tremendous amount of value in the diversity and variety of contracts. And what we're actually seeing, similar to trading, a lot of people that actually have strategies. So it's not, you know, it's not as much of like, I'm buying a team because I'm a fan of it. But there's systematic trading and people are analyzing these things and they have strategies around it. And it goes beyond sports. You guys were mentioning the Warner Brothers merger situation. If you notice the question on everyone's mind is what's likely going to happen to Warner Brothers? Who's going to acquire the company? Is it going to be Netflix or Paramount, Skydance or Neither of the above. And right now we look at the stock prices, right, and we try to reverse engineer what's happening with the situation. Well, there's a prediction market that we illustrated on the platform. And you can see last night it was showing 55% chance Paramount would actually be the ultimate acquirer. This morning it went to 75% Netflix. So even in terms of what value they provide to the news, it can be incredibly powerful and more direct to zero in on the results of that specific outcome. And Now, I'm not saying everyone should be trading prediction markets like any derivatives market. I think people have to make sure it's right for them. But I think they're resonating quite strongly with our active traders. And also I think they're a great way for other folks who may be interested in trading to learn about the new asset class.
- [06:44]
Bloomberg Co-Host Tim Stanwick
It's an incredibly competitive space, Vlad. I don't need to tell you that. And you have, you know, companies and people being minted, billionaires as a result of the competitive space. Right now I'm wondering about the dynamics and how you view the competitive dynamics and whether you have an edge after acquiring Ledger X. Talk about that a little bit.
- [07:07]
Vlad Tenev
Yeah, I mean, right now we're the largest broker in, in the space and actually the brokerage landscape is not very competitive. I mean, we're pretty much the only game in town in terms of the exchanges offering prediction market services. I think there's a big argument to be made for this to be an increasingly institutional business over time in the same way that crypto markets started off being exclusively retail and have sort of like built up institutional adoption over time. I think, I think you can make a perhaps even stronger argument that the same is going to happen with prediction market event contracts. If you just look at the trillions that are being used are being deployed into interest rate futures and swaps to hedge interest rate risk by, by institutions, prediction markets offer a way more direct mechanism for actually hedging that risk. So our acquisition, our partnership with SIG to acquire Ledger X, I think is a way for us to tap into what we believe will be a growing institutional market for this asset class. And if you couple that with our broad retail reach, I think that positions us well to continue growing with the space, if not faster than the aggregate growth in the sector.
- [08:35]
Bloomberg Co-Host Tim Stanwick
What's the effect that that acquisition has on, let's say Kalshi, for example, that that is a partner of yours right now, but also a competitor.
- [08:44]
Vlad Tenev
Yeah, I mean, the more prediction market exchanges join the market, the more price competition there is. Right. And we see a world where it's increasingly multipolar. I think there's going to be multiple dozens prediction market exchanges. And I think that will lead to a great outcome for ultimately the traders in this space. Because the more exchanges there are, the more we put pressure on the transaction fees and get them to be close to rock bottom. And what happens is more liquidity comes into the space, more institutional interest and prices go down. And as with any asset, you know, crypto equities options. Robinhood is just focusing on providing the best execution for customers. So we connect to a wide variety of of exchanges and market centers to facilitate that.
- [09:39]
Indiana University Narrator
Old playbooks won't solve tomorrow's problems. Indiana University is redefining the relationship between higher education and industry. We're addressing future talent and workforce needs through more than 10,000 industry partnerships, supporting and investing in young entrepreneurs and businesses that create jobs and grow the economy, and facilitating the research and development that lead to breakthrough solutions. This isn't business as usual. Indiana University plus industry is a partnership that fuels economic growth. Explore I use impact@iu.edu/impact Vlad For a.
- [10:16]
Bloomberg Host
Lot of people, it's not clear what the difference is between prediction markets and outright gambling. Are you concerned about potential hit to volumes if you're forced to exit certain states over conflicts with gambling regulators?
- [10:30]
Vlad Tenev
Yeah, I think a lot of times this discussion of, you know, is it trading or gambling? Gets into sort of a debate on the meanings of, of words. But one clear benefit of prediction markets is that these contracts are traded on regulated exchanges where buyers and sellers meet together. And essentially this has a lot of downstream effects. Right. One of them is you get a wide variety of contracts being offered. You know, we've gone from one to thousands in the past year. You could see a world where it gets to tens of thousands and hundreds of thousands and pretty much any event could be priced in real time and tradable. The second is because these happen on an exchange where buyers and sellers meet. Our incentives aren't to trade against our customers. And that's how a lot of these, you know, state regulated operators run. Their, their business model is not to exchange orders, it's actually to trade against the customer which basically, you know, and they kind of jujitsu around this when, when they get asked, but they're, they make money when their customers lose. Our benefit, our, our incentive as a business is to bring on customers and have those customers account balances grow steadily and monotonically over time. So I think we're actually incented to, to grow with our customers. And that leads us to offering a wide variety of products for them to invest and trade in. Not just prediction markets which are, which are enticing to bring new people in, but also things like Robinhood Strategies, Retirement, the cortex AI tools that are continuing to proliferate throughout the platform. Yeah, so, so our vision is really can we build a financial super app where all of your financial needs are met in one place and all of your, all of your finances are managed to the best of, of our ability at Robinhood.
- [12:41]
Bloomberg Host
Well, speaking of all financial needs, there's a lot of chatter on Trump accounts for kids where the government seeds Investment accounts with $1,000 for children as one big beautiful bill. Are you still positioning yourself for consideration? Have you heard who else might be in the running?
- [12:57]
Vlad Tenev
Yeah, well, I've spoken to the President and obviously the government about this personally. And basically, while we can't give you the details of, of, of what we're involved in or what we're talking about, I think this is incredibly important. I think we have a huge risk, risk in this country of people not believing in the free markets and in the financial system because they don't have skin in the game. I think it's especially a problem now when we're in this massive wave of AI driven disruption. So, you know, you're seeing AI products being adopted at an accelerating rate, but at the same time AI being generally unpopular because people are pretty, pretty worried about what impact it's going to have on them and their jobs. And I think the best way to actually counteract this is from an early age, give people a stake in what's being built in the great industries of this country. So I think it's a great initiative and we've assured them that we're, we're standing ready to help in the maximal way possible.
- [14:05]
Bloomberg Co-Host Tim Stanwick
To Scarlett's point, Ray Dalio's going to donate to Trump accounts in Connecticut. BlackRock is going to match Trump account contributions for employees. A lot of companies are wondering if their companies are going to do it. Any plans to do that for Robinhood employees?
- [14:19]
Vlad Tenev
I think we're thinking of a lot of things and what I'm mostly interested in is, you know, obviously not to downplay, Robinhood has thousands of employees, but I think our value is we serve tens of millions of customers in the US and we've got, you know, over a third of a trillion in assets on the platform.
- [14:42]
Indiana University Narrator
So.
- [14:44]
Vlad Tenev
We'Re sort of like thinking bigger, like, how can we help every single company and every single individual in this country plug, plug into the system? Of course we're interested in thinking for our employees, but the impact of that is like relatively low when it comes to the whole country. And we're really thinking about how can we help the whole country and this program be as successful as possible?
- [15:08]
Bloomberg Co-Host Tim Stanwick
Hey, Vlad, before we let you go, I want to talk a little more about the Cortex AI offering and what you're trying to build in this financial super app at Robinhood. If you think about this from the perspective of. And you made clear you don't want this to be an advisor by any means, but you want people to be able to ask questions to the app about different stocks or help find stocks. How is it powered? Like, what is the AI that powers Cortex AI? How is it trained? And what are, what's the underlying model that you're using?
- [15:37]
Vlad Tenev
Yeah, so it's an agentic system, which maybe you guys have heard this buzzword before, but it's not actually just purely the underlying models. We use a variety of models under the hood to power different. You can think of them as experts on our platform. And I think the big advantage that we have when you compare it to say chat, GPT or other LLMs or agents is we have not just the personal information about customers and their accounts and their activity with us, but we also have real time market data across multiple assets streaming into the system. And that allows us to actually ground the information we provide with a high degree of accuracy. So now we can tell you, you know, not just the real time prices for stocks, but also real time predictions and what's likely to happen around thousands of real world events. So you can imagine all of this is culminating into if you're a customer of Robinhood, you no longer have to rely on external sources for the inspiration and the idea behind a trade. It used to be that Robinhood was pretty much just a tool to execute the trade, but now the, the goal is to actually help you with the research, the idea, generate the inspiration behind the trade and prediction markets. Cortex and Robinhood Social, which is new social network we unveiled at Hood Summit a couple of weeks ago, are all converging to drive this evolution and what Robinhood is becoming.
- [17:21]
Bloomberg Host
So Cortex is going to be available to your Gold subscribers. So it sounds like it's a premium service. They'll be paying an additional fee to get these tools. Do you plan to launch any kind of basic version of this?
- [17:35]
Vlad Tenev
You know, we're thinking about that. Like Cortex and Robinhood Gold in general, it is a subscription service, but it's very accessible. So it starts at $5 a month, $50 for the year. And we've seen that over a third of customers that sign up to Robinhood on a quarterly basis actually adopt the gold subscription relatively quickly. So we see a world where the attach rate of our gold subscription offering goes up even more. And it really rivals the attach rates of the leading subscription offerings industry wide. Not just financial services, but also you look at music, streaming video, and I think we can be best in class there. So of course nothing set in stone. We're going to continue to iterate. We might end up with as you suggest, a basic version. But right now we're not seeing any bottlenecks to adoption of Cortex from the Gold subscription.
- [18:38]
Bloomberg Host
All right. Good stuff Vlad. Really appreciate your joining us today Vlad. 10 of is Robin Hood CEO and I also want to thank my co host on Bloomberg Crypto, Tim Stanwick.
- [18:48]
Bloomberg Co-Host Tim Stanwick
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