Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Robinhood reported earnings recently. It showed that its revenue from
Speaker 2: its crypto segment falling, but some of that is shifting
Speaker 2: to its prediction markets business. The platform is saying that
Speaker 2: the annualized revenue from its event contracts were about four
Speaker 2: hundred and fifteen million dollars in the first quarter, compared
Speaker 2: to cryptos implied five hundred and thirty six million dollar pace.
Speaker 3: La Tene is here.
Speaker 2: He's chairman and CEO of Robinhood and he joins us
Speaker 2: now on set, Ladys. Always good to see you. Prediction
Speaker 2: markets revenues, as I mentioned, now bigger than that from
Speaker 2: stock trading. The business did not exist just a few
Speaker 2: quarters ago. When does it overtake crypto revenues?
Speaker 4: And that's a good point. It's a very new business
Speaker 4: for us. It's nascent as an asset class. Prediction markets
Speaker 4: really entered the mainstream in the twenty twenty four election,
Speaker 4: which is when we launched our offering, and I think
Speaker 4: we're just at the beginnings of the of this new
Speaker 4: asset class.
Speaker 3: Does it become the biggest business.
Speaker 4: Well, I don't really think about it that way. So
Speaker 4: Robinhood is a financial super app. We're striving to serve
Speaker 4: all of our customers financial needs across every asset class
Speaker 4: and every financial transaction worldwide. So I think there's plenty
Speaker 4: more room to run. But there's also plenty of room
Speaker 4: to run in our other business lines. We have eleven
Speaker 4: lines of business generating one hundred million in revenue or
Speaker 4: more per year, with plenty more on deck.
Speaker 2: Well, and we're going to get to more on crypto.
Speaker 2: But I do want to stay with prediction Markets for
Speaker 2: a second because it's kind of like what everybody is
Speaker 2: talking about right now. It's a big part of our
Speaker 2: in fact, it's a big part of Bloomberg Crypto. Now,
Speaker 2: how much is sports related on the platform? Because our
Speaker 2: Bloomberg intelligence team does an analysis of call Shee for example,
Speaker 2: they say eighty to ninety percent roughly of the activity
Speaker 2: on call she is sports related. How much of that
Speaker 2: is sports related on Robinhood.
Speaker 4: Yeah, it's a big chunk of it for sure. But
Speaker 4: we are seeing north, We're seeing nonsports contracts continuing to
Speaker 4: gain share, and sports is just easily understandable. Right You're
Speaker 4: seeing prediction Markets being a disruptor and an alternative to
Speaker 4: traditional sports books, and there's already an established behavior there,
Speaker 4: whereas general event trading is a little bit newer. It's
Speaker 4: harder for some customers to wrap their heads around. We
Speaker 4: do a lot to educate customers on that, but we
Speaker 4: see it growing and in fact, as the product matures,
Speaker 4: we see a world where actually nonsports eventually overtakes sports.
Speaker 1: I'm still going to stick with prediction markets. It's just
Speaker 1: too interesting. So is Robinhood. You're partnering right now on infrastructure,
Speaker 1: but is the goal for robinhood to have its own
Speaker 1: integrated prediction market exchange and clearing system.
Speaker 4: We did announce a joint venture with Susquehanna, which is
Speaker 4: one of the leading market makers to launch rather era.
Speaker 4: So we acquired ledger x if you're familiar, which is
Speaker 4: a long established futures DCM and DCO and that actually
Speaker 4: is going to go live this quarter. So for a
Speaker 4: while we've been partnering with third parties to provide the
Speaker 4: exchange and clearing infrastructure, but now we have a vertically
Speaker 4: integrated stack later this quarter.
Speaker 1: So what role would college you play in Robinhood's ecosystem
Speaker 1: once you fully launch that one?
Speaker 4: They would be an alternative exchange provider along with forecast x,
Speaker 4: and who knows, we might also integrate with more exchanges. Really,
Speaker 4: what we're looking for is how do we give customers
Speaker 4: choice and flexibility and give them the best pricing and
Speaker 4: the best access to contract selection.
Speaker 1: Any names in your list other than College that you're
Speaker 1: looking to.
Speaker 4: Chat, I mean, I think we've had conversations with all
Speaker 4: the with all of the players. I should also say
Speaker 4: on the Rotherra side, a lot of people are interested
Speaker 4: in coming to roth Era as well because they know
Speaker 4: Robinhood brings a lot of distribution, a lot of usage.
Speaker 4: So we've been hearing from, you know, folks that want
Speaker 4: to integrate with rother Era at launch and they see
Speaker 4: the combination of Robinhood and SIGG as a very very
Speaker 4: strong one to bring liquidity into the market.
Speaker 2: You know, I've spoken quite a bit about prediction markets
Speaker 2: with other CEOs. Rick Worcester of Schwab, for example, they
Speaker 2: don't offer prediction markets right now, and he's told me
Speaker 2: that when and if they do offer, they don't want
Speaker 2: to offer sports because he sees that as gambling and
Speaker 2: he doesn't see that as being aligned with his own
Speaker 2: financial services and what he's doing at his firm. What
Speaker 2: would you say to critics who say, well, maybe we
Speaker 2: understand prediction markets and event based contracts on the economy
Speaker 2: and certain other parts, maybe oil prices, but what we
Speaker 2: don't see sports fitting into financial services?
Speaker 3: What would you say to those critics?
Speaker 4: I mean, I think the reality of it is sports
Speaker 4: is a big part of the economy. A lot of
Speaker 4: money is spent in sports, an increasing amount, and I
Speaker 4: think in particular with the potential automation that we see
Speaker 4: happening from AI, sports is one of those things that
Speaker 4: is continuing to be human. You don't really want to
Speaker 4: watch self driving cars circling a track. It's less entertaining.
Speaker 4: So I think sports is actually big business and it's
Speaker 4: a critical part of the economy, much more so than
Speaker 4: even twenty years ago. When you look at these franchises
Speaker 4: catching you know, ten billion plus valuations, it's increasingly global.
Speaker 4: So the two worlds are starting to converge. And yeah,
Speaker 4: I think this new asset class is going to continue
Speaker 4: to grow and develop, and I think you know a
Speaker 4: lot of competitors Historically you saw this with crypto, right,
Speaker 4: they sort of dismiss the asset class and then eventually
Speaker 4: you'll hear the story shifting to Okay, well, yeah, we'll
Speaker 4: offer it, but only in these ways. And then eventually
Speaker 4: the story becomes while you know, overwhelming demand from our
Speaker 4: customers and now we're offering it and we have to
Speaker 4: compete with with you know, where our customers are going.
Speaker 4: So i'd imagine it's the same thing. And it's hard
Speaker 4: for the incumbents to build and launch new stuff, So
Speaker 4: at first, while they're trying to figure out how to
Speaker 4: build it, they tend to take on a more defensive posture.
Speaker 1: Sometimes I wish we could talk prediction markets, but I
Speaker 1: have to ask you about Trump accounts. Can you explain
Speaker 1: briefly and maybe succinctly because we have a ton more questions.
Speaker 1: How are you working with B and Y and Treasury?
Speaker 1: What exactly is Robinhood doing versus why versus Treasury to
Speaker 1: administer Trump accounts?
Speaker 4: Yeah? Sure, so Trump accounts. For those that might not
Speaker 4: be familiar, it's a brokerage account from birth for every
Speaker 4: newborn seeded with one thousand dollars by the Treasury, and
Speaker 4: Robinhood was chosen in partnership with B and Y. Robinhood
Speaker 4: is going to be the sole initial trustee and broker
Speaker 4: for the Trump Accounts, which means we're not only designing
Speaker 4: and building the Trump Accounts App, which the aspiration will
Speaker 4: be is it's going to be the best product that
Speaker 4: the government's ever been associated with. That's what we hope
Speaker 4: for and what we're building with the National Design Studio.
Speaker 4: But we're also the broker, so the accounts and the
Speaker 4: assets are going to be custodied custody with US and
Speaker 4: B and why the storied oldest bank in the US
Speaker 4: is serving as financial agent and national infrastructure manager.
Speaker 2: Would parents be able to roll over those funds to
Speaker 2: another brokerage.
Speaker 4: Yeah, eventually there will be rollovers, so you'll be able
Speaker 4: to do an accounts to the brokerage of your choice.
Speaker 4: There's no firm data on that. Everyone's eyes are on
Speaker 4: the July fourth launch and just making sure that the
Speaker 4: Trump Accounts app and the initial experience is just really
Speaker 4: top notch.
Speaker 1: You've lagged some significant costs in relation to this program.
Speaker 1: Can you explain how the benefits outweigh the cost of this.
Speaker 4: Yeah, so there was a lot of confusion on this.
Speaker 4: I'm glad that I have a chance to address it.
Speaker 4: So we announced their earnings that there's going to be
Speaker 4: one hundred million cost with developing the Trump accounts, So
Speaker 4: not all of that has been incurred already, but that's
Speaker 4: what we anticipate it will be, and it will be
Speaker 4: profitable for us. So this is we're serving as a
Speaker 4: government subcontractor and it's on a cost plus basis, so
Speaker 4: we're kind of billing for the costs, and really the
Speaker 4: cost comes from the fact that the US government wants
Speaker 4: these accounts and the service to be handled really, really
Speaker 4: well by humans, right, So we have to staff up
Speaker 4: significant servicing because you know, there's five point five million
Speaker 4: children that have signed up already. There's seventy million children
Speaker 4: under the age of eighteen in this country, so we've
Speaker 4: got to be ready to scale up to tens of
Speaker 4: millions of accounts relatively quickly with like top notch support
Speaker 4: and reliability.
Speaker 2: Hey, I've lad one more before we go. Coinbase today
Speaker 2: cutting fourteen percent of staff. Insites, Vollada, markets, AI, Paypalplockcrypto
Speaker 2: dot Com they've had layoffs.
Speaker 3: What does that say to you about the industry right now?
Speaker 4: I mean, I don't know what is going on in
Speaker 4: the internals of other companies.
Speaker 2: I think that is it a related or is it
Speaker 2: crypto related.
Speaker 4: I'm not sure. Maybe it's a combination of both. I
Speaker 4: think the timing, of course, is notable right in the
Speaker 4: this of earning season, but I can't really share more
Speaker 4: than that.
Speaker 2: Glad we wish we had more time, always left catching
Speaker 2: up with you always a pleasure. Thanks so much for
Speaker 2: joining us. Lad ten Evies, chairman and CEO of Robin
Speaker 2: Who and