Robinhood Picks OG.com to Power Prediction Markets, Takes Equity Stakes in Crypto.com

Robinhood is making a much bigger wager on prediction markets and the infrastructure behind them.

The brokerage announced Tuesday that it chosen OG.com as an infrastructure and clearing accomplice for its prediction markets platform in a multiyear settlement, whereas additionally taking minority fairness stakes in each OG.com and its mother or father, Crypto.com.

The deal will deliver OG.com-backed yes-or-no occasion contracts to eligible Robinhood customers in the U.S. by a phased rollout.

Robinhood will get one other trade engine

OG Predicts launched as Crypto.com’s standalone prediction markets enterprise in February and has reportedly grown roughly 20-fold this yr, in accordance to Crypto.com CEO Kris Marszalek, per the Wall Street Journal.

Under the brand new association, it should present the trade and clearing infrastructure for Robinhood’s prediction markets providing.

For Robinhood customers, the quick impact is extra occasion contracts out there in the identical brokerage app the place they will commerce shares, choices, crypto, and now real-world outcomes. The merchandise will likely be provided in phases to eligible U.S. prospects, moderately than changing into universally out there directly.

Prediction market availability is more and more decided not solely by demand, but additionally by state-level authorized restrictions. Robinhood simply agreed to halt new sports-related occasion contracts for Michigan prospects as state regulators proceed their combat over whether or not these merchandise are federally regulated derivatives or unlicensed sports activities wagers.

Adding OG.com doesn’t remedy that underlying authorized downside. It offers Robinhood one other regulated infrastructure accomplice, and doubtlessly one other supply of contract liquidity and product selection, as the corporate navigates it.

An funding, not only a partnership

Robinhood will maintain preliminary minority stakes in each Crypto.com and OG.com, priced in line with the businesses’ current mixed $20 billion valuation. Citadel Securities reportedly took stakes in Crypto.com and OG earlier this yr at valuations of about $15 billion and $5 billion, respectively. Robinhood’s funding phrases weren’t disclosed.

That construction makes the transaction extra significant than a typical distribution settlement.

Robinhood advantages if OG’s trade enterprise grows. Crypto.com advantages from entry to Robinhood’s monumental U.S. retail viewers. And OG will get a significant customer-acquisition channel at a time when the prediction market business is racing to construct liquidity, model recognition, and regulatory credibility.

The corporations are successfully aligning three incentives directly: extra contracts on Robinhood, extra quantity for OG, and a shared monetary curiosity in the expansion of the underlying trade.

Prediction markets turn into core brokerage product

Robinhood has moved unusually shortly to make prediction markets a mainstream retail buying and selling product. Its app has helped take contracts that after principally lived on specialist platforms and put them subsequent to equities, choices and crypto for tens of millions of on a regular basis traders.

That issues for the business as a result of retail distribution could also be extra helpful than the trade itself. An trade wants liquidity; liquidity wants merchants; and merchants are costly to purchase. Robinhood already has the distribution machine.

Its take care of OG.com offers it one other route into the market at a time when client platforms have gotten the important thing battleground. The winners might not merely be the businesses that listing contracts, however the apps that personal the client relationship and might make occasion buying and selling really feel as acquainted as shopping for a inventory.

The regulatory shadow stays

The announcement additionally lands because the authorized standing of sports activities prediction markets turns into extra contested.

Michigan has compelled Kalshi to geofence sports activities contracts by a state-court injunction, and Robinhood separately agreed to stop opening new Michigan sports activities occasion positions by Wednesday. At the identical time, the Sixth Circuit considers the federal-preemption dispute. Other states are pursuing related challenges. Meanwhile, the Third and Ninth circuits reached opposite conclusions on whether or not sports-event contracts are federally protected swaps or state-regulated playing.

Still, Robinhood’s choice clearly indicators that it sees prediction markets as value constructing by the uncertainty. The firm is including infrastructure, bringing in new contracts and taking possession stakes in the enterprise behind the trades.

For the prediction market business, that’s one other step away from a distinct segment trade product and towards one thing bigger.

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