- 8 months ago
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00:00I want to start with these sports wagering capabilities that you've added to your suite of offerings here. These preset combination contracts for professional football games, NFL games.
00:10It sounds like this is your version of parlays that are offered by traditional sports books. So what is the difference between a combination trade and a parlay?
00:19Yeah. So as you mentioned, this is part of our big unveil of prediction markets, which we've offered for a little bit over a year.
00:31But remember, we started with just one prediction market on the platform, which was the presidential election in 2024.
00:38And since then, we've gone to over 1,500 contracts on the platform across pretty much every domain.
00:47We've got politics, we've got world affairs, economics, culture, and we recently added weather.
00:55And of course, as you mentioned, sports. So I think the major innovation here and why it's been so disruptive to the sports industry is you can take the general prediction markets infrastructure,
01:08which are markets that trade on regulated exchanges where buyers and sellers are matched and apply them to pretty much everything.
01:18Now, of course, sports is an important subset of that because there's an existing large market there.
01:25But we see a world where actually the percentage of non-sports contracts grows much faster than sports.
01:34And I think several big industries are likely to be disrupted in the future.
01:40Things like insurance. You can imagine with the weather contracts we have on a platform,
01:45people have already pointed out that, you know, trading and hedging with an insurance weather contract could be superior to buying traditional insurance through a broker.
01:58So as the market matures and you see increased in institutional participation,
02:03I think we could be at the very beginning of a prediction market super cycle with growth in volumes and listed contracts accelerating from here.
02:14Well, we've had a few incidents now of alleged insider trading in prediction markets.
02:19Do you think insider trading poses a risk to fairness in prediction markets or could it help ensure market accuracy by allowing those with privileged information to participate?
02:32Well, I'm not exactly sure which incident you're referring to.
02:36There was an incident in the sports betting space, which is entirely differently regulated, right?
02:44Those are regulated on a state-by-state basis.
02:47And I think they're obviously working hard to address these issues.
02:52But what I tell you is financial markets have had the infrastructure in terms of surveillance and monitoring
02:59to deal with these types of concerns.
03:03And they've been dealing with it for decades because obviously insider trading originated as a market integrity measure for the equities market.
03:13You know, we want to make sure we have protections as an industry to make sure corporate insiders
03:18and other folks weren't using their privileged information about what a company was going to release to trade ahead of that disclosure being available publicly.
03:28So this has pretty much always been a financial markets thing.
03:33And so I think financial markets have the best tools to deal with it.
03:38Vlad, I'm wondering about prediction markets and specifically Robinhood and others, too,
03:44if they offer enough protections to consumers against addictive betting.
03:49How do you solve for that at Robinhood?
03:52I mean, I think our philosophy is if you look at prediction markets, there's a tremendous amount of value in the diversity and variety of contracts.
04:04And what we're actually seeing, similar to trading, a lot of people that actually have strategies.
04:11So it's not, you know, it's not as much of like I'm buying a team because I'm a fan of it.
04:17But there's systematic trading and people are analyzing these things and they have strategies around it.
04:24And it goes beyond sports.
04:27You guys were mentioning the Warner Brothers merger situation.
04:32If you notice, the question on everyone's mind is what's likely going to happen to Warner Brothers?
04:40Who's going to acquire the company?
04:42Is it going to be Netflix or Paramount Skydance or neither of the above?
04:48And right now, we look at the stock prices, right?
04:52And we try to reverse engineer what's happening with the situation.
04:55Well, there's a prediction market that we illustrated on the platform.
04:59And you can see, last night, it was showing 55% chance Paramount would actually be the ultimate acquirer.
05:07This morning, it went to 75% Netflix.
05:11So even in terms of what value they provide to the news, it can be incredibly powerful and more direct to zero in on the results of that specific outcome.
05:22And now, I'm not saying everyone should be trading prediction markets.
05:26Like any derivatives market, I think people have to make sure it's right for them.
05:32But I think they're resonating quite strongly with our active traders.
05:35And also, I think they're a great way for other folks who may be interested in trading to learn about the new asset class.
05:44It's an incredibly competitive space, Vlad.
05:47I don't need to tell you that.
05:49And you have, you know, companies and people being minted billionaires as a result of the competitive space right now.
05:56I'm wondering about the dynamics and how you view the competitive dynamics and whether you have an edge after acquiring Ledger X.
06:04Talk about that a little bit.
06:07Yeah.
06:07I mean, right now, we're the largest broker in the space.
06:12And actually, the brokerage landscape is not very competitive.
06:20I mean, we're pretty much the only game in town.
06:22In terms of the exchanges offering prediction market services, I think there's a big argument to be made for this to be an increasingly institutional business over time.
06:34In the same way that crypto markets started off being exclusively retail and have sort of, like, built up institutional adoption over time,
06:45I think you can make a perhaps even stronger argument that the same is going to happen with prediction market event contracts.
06:51If you just look at the trillions that are being used, are being deployed into interest rate futures and swaps to hedge interest rate risk by institutions,
07:03prediction markets offer a way more direct mechanism for actually hedging that risk.
07:08So our acquisition, our partnership with SIG to acquire Ledger X, I think is a way for us to tap into what we believe will be a growing institutional market for this asset class.
07:21And if you couple that with our broad retail reach, I think that positions us well to continue growing with the space, if not faster than the aggregate growth in the sector.
07:35What's the effect that that acquisition has on, let's say, Carl Schaefer, for example, that is a partner of yours right now, but also a competitor?
07:44Yeah, I mean, the more prediction market exchanges join the market, the more price competition there is, right?
07:54And we see a world where it's increasingly multipolar.
07:59I think there's going to be multiple dozens prediction market exchanges.
08:04And I think that will lead to a great outcome for ultimately the traders in the space, because the more exchanges there are, the more we put pressure on the transaction fees and get them to be close to rock bottom.
08:17And what happens is more liquidity comes into the space, more institutional interest, and prices go down.
08:25And as with any asset, you know, crypto, equities, options, Robin is just focusing on providing the best execution for customers.
08:34So we connect to a wide variety of exchanges and market centers to facilitate that.
08:40Vlad, for a lot of people, it's not clear what the difference is between prediction markets and outright gambling.
08:45Are you concerned about potential hit to volumes if you're forced to exit certain states over conflicts with gambling regulators?
08:54Yeah, I think a lot of times this discussion of, you know, is it trading or gambling gets into sort of a debate on the meanings of words.
09:05But one clear benefit of prediction markets is that these contracts are traded on regulated exchanges where buyers and sellers meet together.
09:21And essentially, this has a lot of downstream effects, right?
09:25One of them is you get a wide variety of contracts being offered.
09:29You know, we've gone from one to thousands in the past year.
09:33You could see a world where it gets to tens of thousands and hundreds of thousands, and pretty much any event could be priced in real time and tradable.
09:42The second is because these happen on an exchange where buyers and sellers meet, our incentives aren't to trade against our customers.
09:52And that's how a lot of these, you know, state-regulated operators run.
09:56Their business model is not to exchange orders.
10:01It's actually to trade against the customer, which basically, you know, and they kind of jujitsu around this when they get asked.
10:10But they make money when their customers lose.
10:16Our benefit, our incentive as a business is to bring on customers and have those customers' account balances grow steadily and monotonically over time.
10:26So I think we're actually incented to grow with our customers, and that leads us to offering a wide variety of products for them to invest and trade in, not just prediction markets, which are enticing to bring new people in, but also things like Robinhood strategies, retirement, the Cortex AI tools that are continuing to proliferate throughout the platform.
10:50So our vision is really, can we build a financial super app where all of your financial needs are met in one place and all of your finances are managed to the best of our ability at Robinhood?
11:05Well, speaking of all financial needs, there's a lot of chatter on Trump accounts for kids, where the government seeds investment accounts with $1,000 for children as part of the one big, beautiful bill.
11:15Are you still positioning yourself for consideration?
11:17Have you heard who else might be in the running?
11:20Yeah, well, I've spoken to the president and obviously the government about this personally, and basically, while we can't give you the details of what we're involved in or what we're talking about, I think this is incredibly important.
11:38I think we have a huge risk in this country of people not believing in the free markets and in the financial system because they don't have skin in the game.
11:49I think it's especially a problem now when we're in this massive wave of AI-driven disruption.
11:56So, you know, you're seeing AI products being adopted at an accelerating rate, but at the same time, AI being generally unpopular because people are pretty worried about what impact it's going to have on them and their jobs.
12:11And I think the best way to actually counteract this is from an early age, give people a stake in what's being built in the great industries of this country.
12:21So I think it's a great initiative, and we've assured them that we're standing ready to help in the maximal way possible.
12:29To Scarlett's point, Ray Dalio's going to donate to Trump accounts in Connecticut.
12:34BlackRock is going to match Trump account contributions for employees.
12:37A lot of companies are wondering if their companies are going to do it.
12:39Any plans to do that for Robin Hood employees?
12:43I think we're thinking of a lot of things, and what I'm mostly interested in is, you know, obviously not to downplay Robin Hood has thousands of employees,
12:53but I think our value is we serve tens of millions of customers in the U.S., and we've got, you know, over a third of a trillion in assets on the platform.
13:06So we're sort of, like, thinking bigger.
13:10Like, how can we help every single company and every single individual in this country plug into the system?
13:17Of course, we're interested in thinking for our employees, but the impact of that is, like, relatively low when it comes to the whole country,
13:26and we're really thinking about how can we help the whole country and this program be as successful as possible.
13:32Hey, Vlad, before we let you go, I want to talk a little more about the Cortex AI offering and what you're trying to build in this financial super app at Robin Hood.
13:41If you think about this from the perspective of, and you made clear, you don't want this to be an advisor by any means,
13:45but you want people to be able to ask questions to the app about different stocks or help find stocks, how is it powered?
13:53Like, what is the AI that powers Cortex AI?
13:56How is it trained, and what's the underlying model that you're using?
14:01Yeah, so it's an agentic system, which maybe you guys have heard this buzzword before,
14:09but it's not actually just purely the underlying models.
14:13We use a variety of models under the hood to power different – you can think of them as experts on our platform.
14:22And I think the big advantage that we have when you compare it to, say, ChatGPT or other LLMs or agents
14:31is we have not just the personal information about customers and their accounts and their activity with us,
14:38but we also have real-time market data across multiple assets streaming into the system.
14:44And that allows us to actually ground the information we provide with a high degree of accuracy.
14:52So now we can tell you, you know, not just the real-time prices for stocks, but also real-time predictions
14:58and what's likely to happen around thousands of real-world events.
15:04So you can imagine all of this is culminating into – if you're a customer of Robinhood,
15:10you no longer have to rely on external sources or the inspiration and the idea behind a trade.
15:19It used to be that Robinhood was pretty much just a tool to execute the trade,
15:24but now the goal is to actually help you with the research, the idea, generate the inspiration behind the trade.
15:32And prediction markets, Cortex, and Robinhood Social, which is a new social network we unveiled at Hood Summit a couple weeks ago,
15:41are all converging to drive this evolution and what Robinhood is becoming.
15:45So Cortex is going to be available to your Gold subscribers, so it sounds like it's a premium service.
15:51They'll be paying an additional fee to get these tools.
15:55Do you plan to launch any kind of basic version of this?
15:59You know, we're thinking about that, like Cortex and Robinhood Gold in general, it is a subscription service,
16:07but it's very accessible. So it starts at $5 a month, $50 for the year.
16:13And we've seen that over a third of customers that sign up to Robinhood on a quarterly basis
16:19actually adopt the Gold subscription relatively quickly.
16:24So we see a world where the attach rate of our Gold subscription offering goes up even more,
16:31and it really rivals the attach rates of the leading subscription offerings industry-wide,
16:39not just financial services, but also you look at music streaming, video, and I think we can be best in class there.
16:48So, of course, nothing's set in stone. We're going to continue to iterate.
16:51We might end up with, as you suggest, a basic version, but right now we're not seeing any bottlenecks
17:00to adoption of Cortex from the Gold subscription.
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