HOOD Partners With Susquehanna to Expand Prediction Market Business

Core Insights - Robinhood Markets (HOOD) is leveraging the prediction market boom to create a structural growth engine through the acquisition of a 90% stake in MIAX Derivatives Exchange in partnership with Susquehanna International Group [1][10] - The company plans to launch a dedicated futures and derivatives exchange and clearinghouse by 2026, positioning prediction markets as a long-term core business [3][12] Company Developments - MIAX Derivatives Exchange is a CFTC-licensed entity, and Miami International Holdings retains a 10% stake, providing regulatory credibility and a robust infrastructure [2] - Robinhood's prediction markets have become its fastest-growing product line, with approximately 9 billion contracts traded by over 1 million customers in the first year, generating over $100 million in annualized revenues [4][12] - Management anticipates a potential run rate of $300 million over time, driven by strong customer demand and engagement [4][5] Strategic Initiatives - The establishment of an independent futures and derivatives exchange and clearinghouse will allow Robinhood to manage clearing and execution internally, improving economics and product flexibility [5][6][10] - This move is expected to enhance the company's ability to innovate and respond to market demands, particularly in political, macroeconomic, and sports markets [6] Competitive Landscape - Robinhood faces competition from other firms in the prediction market space, notably Kalshi, which is expanding its regulated event-contract offerings [7] - Traditional derivatives market players like Cboe Global Markets and CME Group are also entering the prediction market arena, indicating a shift towards mainstream acceptance of prediction markets [8][11] - Cboe Global plans to launch event-based contracts tied to economic data, while CME Group is partnering with FanDuel to introduce a consumer-focused platform for trading event contracts [9] Market Outlook - The growing participation in prediction markets signals their transition into a mainstream asset class, characterized by increasing competition, deeper liquidity, and innovation [11] - Robinhood's prediction market business is expected to drive significant growth, appealing to younger traders and diversifying revenue streams beyond traditional models [12]