Robinhood Adds Sports Prediction Markets for March Madness

• Popular investment app Robinhood adds predictions markets to services
• Launch of predictions markets includes partnership with Kalshi
• March Madness and financial markets to be included as part of launch

Robinhood, a financial services company and mobile-first brokerage is expanding their services by adding sports predictions markets or events-based contracts to their platform in time for March Madness. Financial markets such as predicting the Federal Reserve’s target funds rate in May, have also been added. 

Robinhood announced the addition this week on March 17 and will do so through a partnership with Kalshi, a regulated exchange and prediction market. 

Kalshi became the first regulated exchange to offer event contracts on real-world events in 2022. The events contract hub was added to Robinhood’s trading app on Monday and includes contracts for sports results and financial policies.

“We believe in the power of prediction markets and think they play an important role at the intersection of news, economics, politics, sports and culture.” – JB Mackenzie, VP & GM of Futures and International, Robinhood.

We believe in the power of prediction markets and think they play an important role at the intersection of news, economics, politics, sports and culture.” – JB Mackenzie, VP & GM of Futures and International, Robinhood.

How Do Prediction Markets Work?

Predictions markets or events-based contracts allow customers to invest in real-world events by having an opinion on yes-or-no questions.

Kalshi already offers these types of predictions markets for a wide-range of events from politics, to sports, culture, climate, economics and more. One example is the ability to predict the Rotten Tomatoes score of popular movies, purchasing contracts on Yes or No for a rating above or below a certain number.

In the context of March Madness, Robinhood is offering multiple Yes or No contracts for individual matchups and outright winners.

For instance, in the outright predictions contract for the overall NCAA winner, customers can invest on the “Yes” or “No” for individual teams. Contracts are paid out in $1 increments and profit earned is determined by the price of each outcome that fluctuates in real-time based on market sentiment. 

At the time of writing, Duke was given a 24% percent chance of winning on the platform. One contract on the “Yes” for Duke costs 0.24. If Duke wins outright, that contract would pay $1, resulting in 0.76 of profit.

On the other side of the prediction, the “No” contact is priced at 0.78. A correct result on the “No” would pay out at $1, resulting in 0.22 of profit.

Legalities of Sports-Events Contracts

Robinhood’s services are available in all 50 states. Meanwhile, legalized sports betting has only been regulated in 39 states at this time, and follows strict licensing guidelines and oversights on a state-by-state basis. Many states also don’t allow for wagering on events like entertainment and politics. 

By offering sports predictions markets, some regulators are concerned that Robinhood is circumventing these requirements.

This was the case just last month when concern from the Commodity Futures Trading Commission (CFTC) saw Robinhood reverse course and decide against offering contracts for the Super Bowl. The CRTC is required to conduct a risk management assessment on retail brokerages who are launching new products. The assessment was not completed in time for the Super Bowl, but has been completed for Robinhood now. 

Still, offering a product that is compared to sports betting, could be in violation of state gaming laws.

Earlier this month, Kalshi was ordered to remove their events-based contracts in Nevada. Nevada listed several areas the company was in violation of. Kalshi won a court case against the CFTC last year that allowed them to continue to offer political predictions contracts including on the US Election.