Robinhood CEO Sees Crypto Leading Prediction Market Surge

Robinhood CEO Vlad Tenev believes that crypto will lead a surge in prediction market trading volume, but this doesn't necessarily mean investors should buy prediction market contracts for crypto. In fact, according to Robinhood's operating data, sports-related contracts are on track to become the minority within the next few years.

In the second quarter, Robinhood brought in $156 million from its prediction market activities, a 10-fold increase year-over-year. Event contracts traded ran 15 times ahead of levels seen a year ago, with crypto-related contracts becoming a disproportionately large share of that segment.

Kalshi, another provider of prediction markets, saw crypto prediction market volume increase from $337 million in January to about $7.5 billion by August, with Bitcoin contracts responsible for 13% and bets bundling several different outcomes accounting for 62%. However, investors should note that it is generally a fool's errand to predict the short-term price movements of cryptocurrencies.

While prediction markets may not directly affect crypto prices or investor decisions, they do pose a risk to traders. A study by the Centre for Economic Policy Research found an average pre-fee loss of 20% per contract and that probabilities implied by contracts were too biased to be used as 'true' probabilities.