Robinhood is About to Become America's Next Great Casino

In 2018, the Supreme Court made a decision that would change the gambling landscape nationwide: it put the power in the states’ hands to determine whether or not they would allow sports gambling.

Fast-forward seven years and 38 states now allow sports gambling — and it has been quite the tax boon.

Whether it’s a good thing is up to the individual. But this is a country of freedom — and you get to decide whether it’s heathy or not (unless you live in one of the 12 states where it’s still illegal).

This opened the door for companies like DraftKings to swoop market share. The company is now worth nearly $20 billion and growing. But it opened the door for others as well.

The latest entrance into the market is Robinhood.

Robinhood has long been a favorite of retail investors for its easy-to-use stock trading platform. It has made investing much more accessible to younger people, eliminating trading fees and offering fractional shares — allowing people to throw a few bucks into a company that they’d otherwise have to pony-up hundreds of dollars to own.

Now, Robinhood allows futures contract betting on its platform — a.k.a. “Prediction markets.”

Through this, Robinhood allows users to bet on financial events like the Fed decision in June, inflation in May, GDP growth, etc. Like a stock, the higher the probability means a higher price.

For the Fed decision on interest rates in June, Robinhood offers five outcomes: No change, cut 25bps (basis points), cut more than 25bps, hike more than 25bps, and hike 25 bps.

The market expects no change, showcased by the current price of 93 cents per contract. One dollar earns one contract, meaning 105 contracts costs about $100 after commission fees. If I were to place $100 on this contract, I would be paid out $105 should it turn out correct.

If I were to place a $100 bet on the Fed cutting 25bps, currently priced at 8 cents, I would be paid out $1,000.

Sounds like pretty good returns, eh?

Like anything else, it’s all risk management. If you have a hunch, or data to back up a bet, it can be a relatively low-risk way to get big returns.

It’s not just boring stuff like what the Federal Reserve will do, though. You can also bet on sports.

There are cut and dry futures options like who will win tonight’s Western Conference Finals matchup between the Timberwolves and Thunder. Currently, the market favors OKC (58 cents) over Minnesota (42 cents).

If I felt good about the Wolves and threw, say, 10 bucks onto them to win, I’d receive $20 if they were able to pull it off.

It gets a little more fun for wide-open fields like golf, racing, etc. If you wanted a vested interest in tomorrow’s Indianapolis 500, you could throw some cash on the Robinhood favorite of Alex Palou at 20 cents, or dig a little deeper for a former winner like Scott Dixon (9 cents), Takuma Sato (7 cents), or Helio Castroneves (2 cents).

If your hunch proved correct on Helio winning his fifth 500 at the ripe age of 50, you could turn a measly 40 cents into $10, $4 into $100, and so on.

Robinhood has been chasing the big dogs in the financial game for a long time now. But through years of innovating and product development, the company continues to raise revenues and give investors new opportunities to make money.

Futures are just the newest version of that — and it may help Robinhood grow into a different financial platform altogether.