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 taking place. It is a fascinating imaginative and prescient of metaphysics, and I want to hear extra about it. Nobody wager on my beginning, as an example, and thus there is no such thing as a asset class regarding my existence. So am I actual?

I’m kidding. Clearly whoever wrote that’s simply not excellent at sentences. No, I need to get right down to the center 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 attempting to take your cash. “Democratizes entry” is a technique you may describe “opening a betting market,” however I don’t assume it’s probably the most correct one!

Right here’s what Robinhood will let customers do, beginning immediately. In the event you consider Kamala Harris or Donald Trump will win the presidential election, you should purchase an “occasion contract.” You’ll be able to commerce these contracts for actual cash; they’re a sort 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 provides political occasion contracts. That case is being appealed, however received’t be determined earlier than the present election.

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

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 reviews exhibits that an terrible lot of its income development 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 regarded on the income mannequin — Robinhood makes cash each time a consumer trades, and the extra continuously a consumer trades, the extra doubtless they’re to lose cash.

I don’t assume anybody imagines an investor build up long-term wealth by playing on the presidential election. Actually it’s not the sort 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 might show to be much more efficient at producing income than crypto.