Robinhood Expands Prediction Markets Footprint With LedgerX Purchase

Robinhood is set to acquire LedgerX, a derivatives exchange formerly owned by FTX.

It’s part of a joint deal announced Tuesday (Nov. 25) by the financial services platform and capital markets company Susquehanna International to purchase a majority stake in LedgerX, which was once owned by the now-defunct cryptocurrency platform FTX before being taken over by Miami International Holdings.

“Robinhood is seeing strong customer demand for prediction markets, and we’re excited to build on that momentum,” JB Mackenzie, the company’s vice president and general manager of figures and international, said in a news release.

“Our investment in infrastructure will position us to deliver an even better experience and more innovative products for customers.”

The deal allows Robinhood to launch “a futures and derivatives exchange and clearinghouse,” the release noted, with Susquehanna acting as a “key partner and day-one liquidity provider,” with other liquidity providers set to be added. The company also notes that prediction markets are now Robinhood’s fastest-growing product line in terms of revenue.

“Just one year since launch, 9 billion contracts have been traded by more than 1 million Robinhood customers,” the release said. “By introducing a robust, institutional-grade exchange to the market, we’ll add more choices for consumers. We’ll also gain the flexibility to build faster and deliver more contracts and services to traders.”

Robinhood Chairman and CEO Vlad Tenev said earlier this month that since launching prediction markets  the company has doubled its volume of contracts each quarter.

The announcement of Robinhood’s latest prediction venture came the same day as a report that Bank of America analysts had warned that consumers’ growing use of prediction markets and sports gambling sites could create new credit risk for lenders.

“Easy access and gamified interfaces encourage frequent and impulsive wagers,” the Bank of America strategists wrote in a note, per a Bloomberg News report. “For investors this convergence of entertainment and speculative finance signals heightened behavioral risk that could pressure credit quality, increase delinquencies, and impact earnings for issuers and subprime lenders.”

PYMNTS reported last month that the prediction market boom blurs the boundaries between trading and gambling.

“At its best, the embrace of events-based contracts could represent a new asset class: event outcomes traded with derivatives-grade infrastructure transparency and liquidity,” the report said. “At its worst, it could serve as a potential regulatory arbitrage path around state gaming laws, one with thin consumer protections and opaque payout mechanics.”