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00:00When your stocks went up, you didn't quite think there was a prediction market that actually sent it higher because you have a whole host of businesses.
00:09Well, you mentioned yourself, though, just now how prediction markets are a new source of information about real events.
00:17Government shutdown being top of mind today.
00:20So I think it just illustrates the power of this technology, not just as an investment asset, but as a source of news and information.
00:28And almost like a new media.
00:31You're obviously excited about the prediction market.
00:33You want to take it outside the U.S.
00:35I mean, what kind of potential do you see?
00:37What conversations are you having?
00:38And what kind of feedback are you getting?
00:41I think that the really interesting thing lately is we've been on a bit of an international tour.
00:48I just got back from Dubai.
00:50We're here in Singapore at this conference.
00:52And the rest of the world is very interested in prediction markets.
00:57I mean, in every single international conversation I'm having, it comes up and everyone's trying to figure out their prediction market strategy.
01:05So I wouldn't have expected that necessarily.
01:09I thought it would be mainly a U.S. thing.
01:12But I think it's going to be much bigger.
01:14How much bigger?
01:15Can you put a number to it?
01:16And what kind of growth are you anticipating?
01:18Well, we recently shared that there was a Piper Sandler report, actually.
01:25$200 million in annualized revenue run rate for our prediction market business, which would make it among, if not number one, of our fastest growing businesses of all time.
01:37Which, you know, we have a large crypto business.
01:39We're obviously leading in retail options and other assets.
01:45So this type of growth that we've been seeing is a little bit unique.
01:52And I think there's so many ways we can make the product better.
01:55And it's still a new product.
01:57You know, consumers are trying to figure out where it fits in the whole landscape.
02:02So we're optimistic about the future.
02:05But there are criticisms, right?
02:06I mean, some are saying that we're seeing a blurring of lines between, you know, finance and gambling.
02:13And it doesn't necessarily sit well with some, I guess, regulators.
02:18Yeah.
02:18Any time there's a new innovation, and I think what everyone agrees is prediction markets is an innovation.
02:26We don't really know how to bucket it.
02:27It has properties of wagering, as you've mentioned, but also active trading.
02:33The trades are happening on an exchange.
02:35There's price discovery.
02:36There's no house, as in traditional betting.
02:39So you have a lot of traders going into the market and actually trading in and out during events.
02:45And then it's a source of information.
02:48So some people are like, is it gambling?
02:49Is it trading?
02:50Is it news?
02:51And I think the reality is it has properties of both, but it's a slightly different animal.
02:57And it has the potential to disrupt each of these three major industries.
03:02You talked about how you've been surprised by the reception, right?
03:05I mean, people are excited about the prediction market.
03:07I'm just wondering if, you know, there are countries out there which are enthusiastic, more enthusiastic than the others.
03:15I mean, which ones are they?
03:17Which markets are excited about it?
03:19I think it's a global phenomenon.
03:21I mean, even looking outside of Robinhood, you have Polymarket, which is bringing on-chain prediction markets on the rest of the world.
03:32In the U.S., we have Calci as one of the larger exchanges, and they're going through it in the more regulated TradFi matter.
03:42So I think the really interesting thing is it sort of mirrors the TradFi crypto duopoly across all assets.
03:51Tokenized stocks, for example, which we're introducing outside of the U.S., are on-chain versions of the U.S. counterpart.
04:00And in the U.S., we have sort of the traditional rails that are powering it.
04:04So you're going to see a similar thing where, you know, prediction markets could be a huge accelerant outside the U.S. for the crypto ecosystem.
04:13So it could be a big business for you eventually in, what, say, 5, 10 years?
04:17I think it's already a big business for us.
04:20I think the question is, how big can it get and how quickly?
04:25And, you know, we're innovating.
04:27We're on the front foot.
04:28We're focused on making the product better, serving our customers.
04:32Like any tradable asset, I think, Robin, it will be front and center in giving access to retail.
04:37Let's talk about tokenization, because some people say that this could be the new ETF of finance.
04:43How do you see that playing out?
04:45I said earlier in our chat, I think tokenization is a freight train, and it'll eat the entire financial system.
04:53But I think it'll be a very positive thing.
04:58I think that the financial system will be largely willing to go through this transition.
05:04I think what you're going to see is outside of the U.S., where there's a little bit less legacy infrastructure,
05:11and the big incumbents can consider it net new business.
05:15You'll see it, you know, getting market dominance first, and then it'll be somewhat backported.
05:21You can see this in Robinhood's business.
05:22We launched stock tokens in the EU, which are tokenized versions of several hundred top names.
05:30We also introduced and demonstrated tokenization of OpenAI and SpaceX private companies.
05:36And as soon as that happened, we started getting lots of calls, not just from companies that wanted to know how to get involved,
05:44but also from large established counterparties, market makers, institutions.
05:50And they were asking us, they were like, wait a minute, how do we get involved?
05:53Can we provide liquidity here?
05:55Can we plug into your European offering?
05:58So I'm very optimistic that this is going to be a big shift, and we're at the very beginning of it.
06:07You talk about a big shift, and we have to throw it out there.
06:11It's not just about stocks.
06:13It could be about bonds, real estate.
06:14And today we ran a story on the Bloomberg about how Zag Witkoff is talking possibly about tokenizing Trump's real estate.
06:23How realistic is that?
06:24How soon might that happen?
06:27I'll tell you, it's not a technology barrier.
06:29We have the capability to tokenize all sorts of real-world assets.
06:33You saw that in our European announcement.
06:36You know, we could tokenize privates.
06:38Obviously, we're live with tokenized versions of public equities.
06:42Real estate, art, all of these assets that have been typically the domain of high-net-worth individuals,
06:50they've been illiquid, they've had high fees for transactions.
06:56I think you'll see those being tokenized and being packaged up and made available to the mass market.
07:02And I think real estate's a big opportunity.
07:04I think it's smart that they're aggressively pursuing that because everyone wants access to high-quality real estate,
07:13particularly the mass market.
07:15But isn't it true real estate is actually more complex?
07:17I mean, they've tried this before.
07:19It hasn't really worked.
07:21It has some similarities to a private company, actually.
07:25If you think about what a real estate investment looks like, you create a corporation.
07:32Using that corporation, you acquire some assets.
07:35It has some costs, which you want to minimize as much as possible.
07:38Maintenance.
07:39It has revenues like rent receivables, depending on how you use it.
07:43So, if you can tokenize a private company, that same technology can actually be used to tokenize real estate,
07:53be it residential, commercial.
07:56And, yeah, I think we figured out how to do it.
07:59It's just a question of regulation and what the right products are for different groups of customers.
08:04And at Robinhood, are you in a hurry to tokenize more stocks?
08:08Because, you know, we talk about how Wall Street is a laggard,
08:11but we've heard from the likes of Nasdaq wanting to tokenize every single stock that is traded on its exchange.
08:18Do you feel like that's potential competition there?
08:23I don't think so.
08:24I think with Nasdaq and the other sort of traditional players,
08:28I expect them to be a late adopter of the technology.
08:31And the reason is, you know, it's not really a technology issue or a competence issue.
08:40They're very competent, but they have lots of counterparties that they need to bring along on this.
08:47You know, they have legacy brick-and-mortar-based financial institutions.
08:50They want to make sure that they only move as quickly as their existing customers are able to move.
08:57And so I think they'll get there eventually, but they're not at the frontier.
09:03And that's why we're focused on our own exchange technology through Bitstamp and Robinhood chain.
09:09I think the infrastructure is not there,
09:13which means we're going to have to build a lot of it ourselves to power our own products
09:17before the rest of the industry can catch up.
09:20How about in terms of regulation?
09:22Some people have suggested that perhaps you're walking a tightrope.
09:28The regulation is critical.
09:31And actually, a lot of the regulators that we talk to are very, very keen to make this happen.
09:38They recognize tokenization as an innovation, and they want to be first.
09:44They don't want to be left behind.
09:45And so you're seeing folks we're talking to in Europe are interested in it.
09:52They want to make sure it's safe for customers, of course.
09:55In the U.S., I mean, Chairman Atkins has said tokenization is happening.
10:01It is an innovation.
10:02And, you know, they're working very closely with industry to make sure it happens safely, but also quickly.
10:09I'll be remiss not to talk about cryptocurrencies.
10:12You know, we talk about how excited you are about it.
10:14You talk about how cryptocurrencies will be the backbone of the financial system.
10:20What gives you that optimism when, you know, not everybody's buying into the whole concept of cryptocurrencies?
10:26Yes, they're buying into blockchain technology, but not necessarily cryptocurrencies.
10:30I think from the very beginning, there was a belief by this community that blockchain is going to power a lot of real-world assets.
10:41This was maybe, you've heard this for much of the last 10 years.
10:45But the problem is that the technology hadn't caught up.
10:50There weren't real products in customers' hands, like stock tokens in the EU, for example.
10:54And, you know, blockchain itself became a little bit of, like, a buzzword that people moved away from.
11:03They were like, okay, the blockchain thing didn't happen.
11:05Let's go to Bitcoin or meme coins.
11:09But we've always believed that the technology has very clear advantages.
11:13You have 24-7 trading, liquidity with a large global market, instant settlement.
11:20The costs of operating a blockchain-based trading system are significantly lower than a traditional trading system because you have less counterparties, less mouths to feed.
11:33Much of that is being replaced by computer software.
11:37And so I think for that reason, you know, regulatory clarity permitting, if you have the regulatory clarity,
11:43the industry is going to move to the most efficient solution that has obvious advantages for getting customers and maintaining customers.
11:52What are your own plans when it comes to investing in cryptocurrencies?
11:57You're all in.
11:58I know you're all in when it comes to all your different businesses.
12:02But for cryptocurrencies in particular, what's the plan there in the next 12, 24 months?
12:07I guess there's two ways to look at cryptocurrencies.
12:10One is just as a tradable asset.
12:13You have, you know, listing crypto-native assets and making them available to our active traders.
12:18And then building out the system around that, like collateralization, borrowing, margin, perpetual futures.
12:26And we're aggressively investing there.
12:29You know, we're already among the leaders.
12:32And we think there's a lot of tailwinds for our business in the future.
12:35The more interesting thing that I'm excited about is how do we actually get real-world assets on crypto technology?
12:43Because I think that expands the addressable market from low single-digit trillions to tens of trillions rather quickly.
12:53Because if you look at the size of the global equities market, you're talking like hundreds of trillions.
13:01And it's going to continue to grow.
13:04So it really starts to get interesting when all of those assets, public and private, get on crypto technology.
13:12Then we'll be using it without really thinking about the details of, you know, blockchain or what's happening under the hood.
13:19And, Vlad, I know that AI is a game changer.
13:21You're doing a lot of work on it.
13:23We also know that Robinhood has, I think, an investing bot that's supposed to help traders make decisions.
13:32What can it do right now?
13:33What do you think it will be able to do in the future?
13:36Yeah.
13:36So we had our second annual event for active traders called the Hood Summit.
13:42It was in Las Vegas a couple of weeks ago.
13:45And there we demonstrated the next evolution of Robinhood Cortex, which is our AI tool.
13:53And we have an active trader product called Robinhood Legend.
13:58And a good analogy is active traders have some similarity to software engineers.
14:04They're using lots of screens.
14:06They have a lot of data.
14:07And they're creating a trading strategy, which you can think is very similar to a piece of computer software.
14:14So I think in the same way that AI has completely transformed the work of a software engineer, making it easier to write code, AI will make it easier to create a trading strategy.
14:26And that's the direction Cortex is heading.
14:29We want to augment the work of our active traders to make it as easy as possible to create a powerful trading strategy.
14:36And introduce the guardrails to make sure that it's correct, that you can backtest it.
14:41And I think we can create a lot more active traders.
14:45And we can also save a lot more time.
14:48And that's just the beginning.
14:50I mean, we've made so much progress on Cortex that we're holding an entire product event dedicated to AI that's going to be in December.
14:58So hopefully you'll see some things that you like there.
15:00Just a quick question.
15:02I mean, there's so much optimism, right?
15:03You're investing a lot in everything that you do.
15:05Is there a risk to all the assumptions you're making right now?
15:09I mean, there's always risks.
15:10What's the biggest one?
15:11I think that we have to make sure that with any product we introduce, it's safe for customers, that customers understand it, particularly when we get into new innovations like artificial intelligence.
15:31AI models can hallucinate, right?
15:33And we have to make sure that when it's relating to your important financial services, it's as error-free as possible, like at least as error-free as humans providing the news and information.
15:48So actually, we spend a lot of time.
15:51Everyone wants to talk about the innovations, but it rests on a foundation of regulatory compliance, safety, and the infrastructure has to be really robust.
16:02And that's probably what takes the majority of the time when we build these products.
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