WEBVTT - Robinhood CEO Vlad Tenev Talks Prediction Markets

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Robinhood reported earnings recently. It showed that its revenue from

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<v Speaker 2>its crypto segment falling, but some of that is shifting

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<v Speaker 2>to its prediction markets business. The platform is saying that

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<v Speaker 2>the annualized revenue from its event contracts were about four

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<v Speaker 2>hundred and fifteen million dollars in the first quarter, compared

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<v Speaker 2>to cryptos implied five hundred and thirty six million dollar pace.

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<v Speaker 3>La Tene is here.

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<v Speaker 2>He's chairman and CEO of Robinhood and he joins us

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<v Speaker 2>now on set, Ladys. Always good to see you. Prediction

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<v Speaker 2>markets revenues, as I mentioned, now bigger than that from

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<v Speaker 2>stock trading. The business did not exist just a few

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<v Speaker 2>quarters ago. When does it overtake crypto revenues?

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<v Speaker 4>And that's a good point. It's a very new business

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<v Speaker 4>for us. It's nascent as an asset class. Prediction markets

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<v Speaker 4>really entered the mainstream in the twenty twenty four election,

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<v Speaker 4>which is when we launched our offering, and I think

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<v Speaker 4>we're just at the beginnings of the of this new

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<v Speaker 4>asset class.

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<v Speaker 3>Does it become the biggest business.

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<v Speaker 4>Well, I don't really think about it that way. So

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<v Speaker 4>Robinhood is a financial super app. We're striving to serve

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<v Speaker 4>all of our customers financial needs across every asset class

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<v Speaker 4>and every financial transaction worldwide. So I think there's plenty

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<v Speaker 4>more room to run. But there's also plenty of room

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<v Speaker 4>to run in our other business lines. We have eleven

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<v Speaker 4>lines of business generating one hundred million in revenue or

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<v Speaker 4>more per year, with plenty more on deck.

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<v Speaker 2>Well, and we're going to get to more on crypto.

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<v Speaker 2>But I do want to stay with prediction Markets for

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<v Speaker 2>a second because it's kind of like what everybody is

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<v Speaker 2>talking about right now. It's a big part of our

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<v Speaker 2>in fact, it's a big part of Bloomberg Crypto. Now,

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<v Speaker 2>how much is sports related on the platform? Because our

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<v Speaker 2>Bloomberg intelligence team does an analysis of call Shee for example,

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<v Speaker 2>they say eighty to ninety percent roughly of the activity

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<v Speaker 2>on call she is sports related. How much of that

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<v Speaker 2>is sports related on Robinhood.

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<v Speaker 4>Yeah, it's a big chunk of it for sure. But

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<v Speaker 4>we are seeing north, We're seeing nonsports contracts continuing to

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<v Speaker 4>gain share, and sports is just easily understandable. Right You're

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<v Speaker 4>seeing prediction Markets being a disruptor and an alternative to

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<v Speaker 4>traditional sports books, and there's already an established behavior there,

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<v Speaker 4>whereas general event trading is a little bit newer. It's

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<v Speaker 4>harder for some customers to wrap their heads around. We

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<v Speaker 4>do a lot to educate customers on that, but we

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<v Speaker 4>see it growing and in fact, as the product matures,

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<v Speaker 4>we see a world where actually nonsports eventually overtakes sports.

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<v Speaker 1>I'm still going to stick with prediction markets. It's just

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<v Speaker 1>too interesting. So is Robinhood. You're partnering right now on infrastructure,

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<v Speaker 1>but is the goal for robinhood to have its own

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<v Speaker 1>integrated prediction market exchange and clearing system.

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<v Speaker 4>We did announce a joint venture with Susquehanna, which is

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<v Speaker 4>one of the leading market makers to launch rather era.

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<v Speaker 4>So we acquired ledger x if you're familiar, which is

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<v Speaker 4>a long established futures DCM and DCO and that actually

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<v Speaker 4>is going to go live this quarter. So for a

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<v Speaker 4>while we've been partnering with third parties to provide the

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<v Speaker 4>exchange and clearing infrastructure, but now we have a vertically

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<v Speaker 4>integrated stack later this quarter.

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<v Speaker 1>So what role would college you play in Robinhood's ecosystem

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<v Speaker 1>once you fully launch that one?

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<v Speaker 4>They would be an alternative exchange provider along with forecast x,

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<v Speaker 4>and who knows, we might also integrate with more exchanges. Really,

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<v Speaker 4>what we're looking for is how do we give customers

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<v Speaker 4>choice and flexibility and give them the best pricing and

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<v Speaker 4>the best access to contract selection.

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<v Speaker 1>Any names in your list other than College that you're

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<v Speaker 1>looking to.

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<v Speaker 4>Chat, I mean, I think we've had conversations with all

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<v Speaker 4>the with all of the players. I should also say

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<v Speaker 4>on the Rotherra side, a lot of people are interested

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<v Speaker 4>in coming to roth Era as well because they know

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<v Speaker 4>Robinhood brings a lot of distribution, a lot of usage.

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<v Speaker 4>So we've been hearing from, you know, folks that want

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<v Speaker 4>to integrate with rother Era at launch and they see

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<v Speaker 4>the combination of Robinhood and SIGG as a very very

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<v Speaker 4>strong one to bring liquidity into the market.

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<v Speaker 2>You know, I've spoken quite a bit about prediction markets

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<v Speaker 2>with other CEOs. Rick Worcester of Schwab, for example, they

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<v Speaker 2>don't offer prediction markets right now, and he's told me

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<v Speaker 2>that when and if they do offer, they don't want

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<v Speaker 2>to offer sports because he sees that as gambling and

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<v Speaker 2>he doesn't see that as being aligned with his own

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<v Speaker 2>financial services and what he's doing at his firm. What

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<v Speaker 2>would you say to critics who say, well, maybe we

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<v Speaker 2>understand prediction markets and event based contracts on the economy

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<v Speaker 2>and certain other parts, maybe oil prices, but what we

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<v Speaker 2>don't see sports fitting into financial services?

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<v Speaker 3>What would you say to those critics?

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<v Speaker 4>I mean, I think the reality of it is sports

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<v Speaker 4>is a big part of the economy. A lot of

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<v Speaker 4>money is spent in sports, an increasing amount, and I

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<v Speaker 4>think in particular with the potential automation that we see

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<v Speaker 4>happening from AI, sports is one of those things that

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<v Speaker 4>is continuing to be human. You don't really want to

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<v Speaker 4>watch self driving cars circling a track. It's less entertaining.

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<v Speaker 4>So I think sports is actually big business and it's

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<v Speaker 4>a critical part of the economy, much more so than

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<v Speaker 4>even twenty years ago. When you look at these franchises

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<v Speaker 4>catching you know, ten billion plus valuations, it's increasingly global.

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<v Speaker 4>So the two worlds are starting to converge. And yeah,

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<v Speaker 4>I think this new asset class is going to continue

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<v Speaker 4>to grow and develop, and I think you know a

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<v Speaker 4>lot of competitors Historically you saw this with crypto, right,

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<v Speaker 4>they sort of dismiss the asset class and then eventually

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<v Speaker 4>you'll hear the story shifting to Okay, well, yeah, we'll

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<v Speaker 4>offer it, but only in these ways. And then eventually

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<v Speaker 4>the story becomes while you know, overwhelming demand from our

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<v Speaker 4>customers and now we're offering it and we have to

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<v Speaker 4>compete with with you know, where our customers are going.

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<v Speaker 4>So i'd imagine it's the same thing. And it's hard

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<v Speaker 4>for the incumbents to build and launch new stuff, So

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<v Speaker 4>at first, while they're trying to figure out how to

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<v Speaker 4>build it, they tend to take on a more defensive posture.

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<v Speaker 1>Sometimes I wish we could talk prediction markets, but I

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<v Speaker 1>have to ask you about Trump accounts. Can you explain

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<v Speaker 1>briefly and maybe succinctly because we have a ton more questions.

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<v Speaker 1>How are you working with B and Y and Treasury?

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<v Speaker 1>What exactly is Robinhood doing versus why versus Treasury to

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<v Speaker 1>administer Trump accounts?

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<v Speaker 4>Yeah? Sure, so Trump accounts. For those that might not

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<v Speaker 4>be familiar, it's a brokerage account from birth for every

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<v Speaker 4>newborn seeded with one thousand dollars by the Treasury, and

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<v Speaker 4>Robinhood was chosen in partnership with B and Y. Robinhood

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<v Speaker 4>is going to be the sole initial trustee and broker

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<v Speaker 4>for the Trump Accounts, which means we're not only designing

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<v Speaker 4>and building the Trump Accounts App, which the aspiration will

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<v Speaker 4>be is it's going to be the best product that

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<v Speaker 4>the government's ever been associated with. That's what we hope

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<v Speaker 4>for and what we're building with the National Design Studio.

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<v Speaker 4>But we're also the broker, so the accounts and the

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<v Speaker 4>assets are going to be custodied custody with US and

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<v Speaker 4>B and why the storied oldest bank in the US

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<v Speaker 4>is serving as financial agent and national infrastructure manager.

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<v Speaker 2>Would parents be able to roll over those funds to

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<v Speaker 2>another brokerage.

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<v Speaker 4>Yeah, eventually there will be rollovers, so you'll be able

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<v Speaker 4>to do an accounts to the brokerage of your choice.

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<v Speaker 4>There's no firm data on that. Everyone's eyes are on

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<v Speaker 4>the July fourth launch and just making sure that the

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<v Speaker 4>Trump Accounts app and the initial experience is just really

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<v Speaker 4>top notch.

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<v Speaker 1>You've lagged some significant costs in relation to this program.

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<v Speaker 1>Can you explain how the benefits outweigh the cost of this.

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<v Speaker 4>Yeah, so there was a lot of confusion on this.

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<v Speaker 4>I'm glad that I have a chance to address it.

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<v Speaker 4>So we announced their earnings that there's going to be

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<v Speaker 4>one hundred million cost with developing the Trump accounts, So

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<v Speaker 4>not all of that has been incurred already, but that's

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<v Speaker 4>what we anticipate it will be, and it will be

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<v Speaker 4>profitable for us. So this is we're serving as a

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<v Speaker 4>government subcontractor and it's on a cost plus basis, so

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<v Speaker 4>we're kind of billing for the costs, and really the

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<v Speaker 4>cost comes from the fact that the US government wants

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<v Speaker 4>these accounts and the service to be handled really, really

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<v Speaker 4>well by humans, right, So we have to staff up

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<v Speaker 4>significant servicing because you know, there's five point five million

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<v Speaker 4>children that have signed up already. There's seventy million children

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<v Speaker 4>under the age of eighteen in this country, so we've

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<v Speaker 4>got to be ready to scale up to tens of

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<v Speaker 4>millions of accounts relatively quickly with like top notch support

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<v Speaker 4>and reliability.

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<v Speaker 2>Hey, I've lad one more before we go. Coinbase today

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<v Speaker 2>cutting fourteen percent of staff. Insites, Vollada, markets, AI, Paypalplockcrypto

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<v Speaker 2>dot Com they've had layoffs.

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<v Speaker 3>What does that say to you about the industry right now?

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<v Speaker 4>I mean, I don't know what is going on in

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<v Speaker 4>the internals of other companies.

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<v Speaker 2>I think that is it a related or is it

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<v Speaker 2>crypto related.

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<v Speaker 4>I'm not sure. Maybe it's a combination of both. I

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<v Speaker 4>think the timing, of course, is notable right in the

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<v Speaker 4>this of earning season, but I can't really share more

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<v Speaker 4>than that.

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<v Speaker 2>Glad we wish we had more time, always left catching

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<v Speaker 2>up with you always a pleasure. Thanks so much for

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<v Speaker 2>joining us. Lad ten Evies, chairman and CEO of Robin

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<v Speaker 2>Who and