Robinhood admits it’s only a playing app

Let’s pause — I want to mirror on this unimaginable phrase, about an asset class that democratizes entry to occasions as they unfold. See, I believed all of us had entry to the occasions of the election as a result of all of us exist in actuality and might discover out about them. However apparently, if we are able to’t gamble on an occasion, it isn’t occurring. It is a fascinating imaginative and prescient of metaphysics, and I want to hear extra about it. Nobody guess on my start, as an example, and thus there is no such thing as a asset class referring to my existence. So am I actual?

I’m kidding. Clearly whoever wrote that’s simply not superb at sentences. No, I need to get all the way down to the guts of the matter right here, which is signaled by the phrase “democratizes entry.” This phrase sits proper subsequent to “monetary inclusion” within the lexicon of people who find themselves making an attempt to take your cash. “Democratizes entry” is a technique you’ll be able to describe “opening a betting market,” however I don’t assume it’s essentially the most correct one!

Right here’s what Robinhood will let customers do, beginning right now. If you happen to imagine Kamala Harris or Donald Trump will win the presidential election, you should buy an “occasion contract.” You may commerce these contracts for actual cash; they’re a form of derivatives contract. Robinhood’s thrilling new funding alternative comes after the Commodities Future Buying and selling Fee misplaced a lawsuit towards a platform, Kalshi, that gives political occasion contracts. That case is being appealed, however gained’t be determined earlier than the present election.

Anyway what’s actually enjoyable about election markets is that they’ll skew simply. For example, Polymarket has admitted {that a} single French bettor is answerable for huge bets that Donald Trump will win the presidential race. So whereas the polls present the candidates in a detailed race, Polymarket positioned Trump’s odds of profitable at 62 p.c. Are betting markets correct? Effectively, no, not all the time.

However let’s be actual about Robinhood for a minute. “Robinhood is the brokerage for enjoyable playing on meme shares and meme cryptocurrencies,” Bloomberg’s Matt Levine famous again in 2021. A fast tour of Robinhood’s most up-to-date quarterly earnings studies reveals that an terrible lot of its income progress is attributable to crypto buying and selling.

I’m sufficiently old to recollect a interval when Robinhood CEO Vlad Tenev went round with a straight face insisting that Robinhood was simply a great way of introducing individuals to monetary markets, as if eTrade (and earlier than that, investing golf equipment) didn’t exist already. This was an apparent lie in the event you appeared on the income mannequin — Robinhood makes cash each time a person trades, and the extra continuously a person trades, the extra seemingly they’re to lose cash.

I don’t assume anybody imagines an investor increase long-term wealth by playing on the presidential election. Definitely it’s not the form of factor that goes right into a prudent retirement account. I do assume, although, that that is just the start of the contracts you’ll be capable to gamble on with Robinhood, and people could show to be much more efficient at producing income than crypto.