Key points
- Crypto.com becomes Robinhood's fourth prediction-market venue
- Robinhood takes minority stakes in Crypto.com and OG.com
- Prediction contracts out-earned stock trading last quarter
- Stock-linked perpetual futures discussed, no approval sought
Robinhood (HOOD) signed a deal on Tuesday, September 8, to put Crypto.com's prediction contracts in its app, and it's taking minority stakes in Crypto.com and in OG.com, the exchange Crypto.com spun out to run them. Nobody said what the stakes cost. Robinhood's shares were down 0.6 percent at $121.39 as of 11:43 a.m. Eastern. I think the ownership stakes deserve a closer look.
Count the venues. Robinhood now routes your yes-or-no bets to four different exchanges, and it owns a piece of two of them. Robinhood increasingly owns part of the infrastructure behind the trades it distributes.
What was announced
The deal is multiyear. OG.com is a derivatives exchange and clearinghouse registered with the Commodity Futures Trading Commission, and Robinhood will send retail event-contract orders through it starting Tuesday, in phases, for eligible US customers. Crypto.com's release says the stakes are priced in line with the July investment from Citadel Securities, which valued the Crypto.com group at $20 billion. The Wall Street Journal, which reported the deal first, put Citadel's split at $15 billion for Crypto.com and $5 billion for OG.com.
Kris Marszalek, who runs both companies, told the Journal that "the prediction-market event contracts are just the first product we're going to be launching together." The discussions about stock-linked perpetual futures got my attention. The two sides have discussed equity-linked perpetual futures, crypto-style contracts that track a stock price and never expire. That would need regulatory approval, which doesn't exist today, and no timetable for seeking it has been given.
How Robinhood got here
Robinhood had no prediction market two years ago. It first listed ForecastEx contracts, from the exchange owned by Interactive Brokers, then added Kalshi. Then in January a joint venture of Robinhood and Susquehanna bought 90 percent of a CFTC-registered exchange called MIAXdx, renamed it Rothera, and in June started sending World Cup bets there instead of to Kalshi, Zacks reported. When the Journal first wrote about the Crypto.com talks in July, it cited analysts saying Robinhood's customers had become a shrinking share of Kalshi's volume after Rothera launched. So Kalshi helped establish Robinhood's prediction-markets business, proved it works, and is now watching its biggest distributor buy into the competition, twice.
The money explains why. In the second quarter, Robinhood's event-contract revenue rose more than tenfold to $156 million on a record 13.6 billion contracts, the company reported on July 29. Stock trading brought in $129 million. Crypto brought in $100 million. Only options, at $342 million, were bigger. A lot of that quarter was the World Cup, and JB Mackenzie, who runs the business for Robinhood, told the Journal the OG.com timing lines up with football season and the midterms. "It's something [our customers] want to trade," he said.
Why owning the venue matters
When Robinhood sends a bet to Kalshi, it keeps the commission and Kalshi runs the exchange. When it sends the same bet to Rothera or OG.com, ownership gives Robinhood an economic interest in the venue as well as the customer relationship. The deal doesn't disclose how that translates into earnings per contract. The last nine months follow that logic.
The customer-facing product can look similar across venues. Robinhood picks where the order goes. The relevant questions are whether routing changes prices, fees or execution quality, and the deal doesn't answer them.
What we don't know is everything that would let you size this. Robinhood hasn't said what it paid for either stake, how much of its volume it plans to send to OG.com, or what it earns per contract there versus at Kalshi. Crypto.com is private, and Marszalek told the Journal it's preparing an IPO with no date set, so the stake is also a pre-IPO position, the second Robinhood has taken this summer after its venture fund of startup stakes. Citadel Securities, which set the price in July, had a record quarter of its own at the same time.
Robinhood's third-quarter results, expected in late October, may offer an early indication of OG.com's contribution if the company breaks it out.
