Robinhood and Kalshi have launched a prediction marketplace for the boys’s and ladies’s school basketball tournaments, permitting customers to commerce occasion contracts on sport outcomes.
Robinhood seems to be dipping its toes additional into the prediction markets, teaming up with Kalshi to let customers commerce on school basketball matchups. As a substitute of simply filling out a bracket, followers can now purchase and promote occasion contracts, with costs fluctuating in cents based mostly on how the market views every staff’s probabilities.
In a weblog announcement on Monday, March 17, Robinhood says at launch the so-called prediction market hub “will allow customers to trade contracts for what the upper bound of the target fed funds rate will be in May, as well as the upcoming men’s and women’s College Basketball Tournaments.”
“Now you can trade on the outcome of every match-up in the men’s and women’s college basketball tournaments, including the final championships,” the Menlo Park-headquartered firm mentioned on a devoted internet web page. Customers who maintain successful contracts at settlement will obtain a $1 payout per contract, whereas dropping contracts will probably be value nothing.
How Robinhood’s prediction market works
Robinhood says there are not any hidden tips: if a contract is priced at 53 cents, which means the market sees a roughly 53% probability of that end result occurring. Customers also can promote their positions earlier than the occasion ends, permitting them to take income or reduce losses based mostly on value actions.
Every occasion contract follows a easy yes-or-no format, much like different prediction markets like Polymarket. “Each contract that you own will pay out $1 if that contract resolves to the side you own. It will pay out $0 if not,” Robinhood explains in a FAQ part.
Customers can take both the “Yes” or “No” aspect on a given contract however can’t maintain either side concurrently for a similar occasion. Nonetheless, they’ll take a number of positions throughout completely different matchups. The platform additionally shows open curiosity — the variety of energetic contracts held by customers — to supply perception into market exercise.
Robinhood is charging a $0.01 fee per contract per aspect, and the brokerage executing the orders might impose extra charges, the corporate added. The brokerage large says its occasion contracts fall beneath Commodity Futures Buying and selling Fee laws and are provided in partnership with its rival Kalshi, one other prediction market platform that enables customers to wager on elections, information occasions, and popular culture.
Hidden pitfalls
Robinhood’s plans for increasing its prediction market providing stay unsure, because the house has had its fair proportion of controversy, with disputes over market resolutions being a recurring situation.
Polymarket, one of many largest prediction markets by buying and selling quantity, has a number of occasions confronted criticism over its decision course of. One in every of such instances concerned a market titled “Will Israel invade Lebanon in September?”
On the night time of Sept. 30, Israel launched navy operations in Lebanon to push Hezbollah forces again from the border. Whereas main information retailers broadly referred to the motion as an “invasion,” suggesting the market ought to resolve to sure, it in the end settled as no, sparking backlash from merchants.
The choice hinged on Polymarket’s strict interpretation of its guidelines. Though Israeli troops entered Lebanon, some members argued that an “invasion” required an official declaration or an effort to grab and maintain territory — standards Israel had not explicitly met. Regardless of the widespread use of the time period “invasion” in media protection, the market was dominated to not have technically fulfilled the situations for a sure end result.
Robinhood’s transfer into occasion contracts provides to a broader pattern of economic platforms providing new forms of buying and selling past conventional shares and crypto. Furthermore, it’s additionally not the brokerage’s first try at prediction markets, as earlier than the November elections, Robinhood briefly launched its personal service and later introduced a marketplace for the Tremendous Bowl end result. Nonetheless, in February, Robinhood withdrew the providing after the CFTC instructed the corporate to “not permit customers to access” sports activities occasion contracts.
On the time, Robinhood expressed disappointment, stating that it had been in “regular communication with the CFTC about our intent and plans to offer this product” previous to the launch.
