Robinhood Takes 1% Of Crypto.com's Prediction Exchange At No Cash Cost, Can Earn Up To 10%
The CFO said most prediction-market flow will shift to Rothera and Crypto.com's OG.com by year-end into early next year.
Robinhood, the app-based brokerage that also trades crypto, futures and event contracts, received an initial 1% equity stake in Crypto.com and OG.com with "no cash outlay," CFO Shiv Verma said on the company's third-quarter earnings call Tuesday. The stake can grow to as much as 10%, depending on how much the companies partner.
Routing shifts away from rivals
Verma said Rothera, Robinhood's own prediction-markets exchange, will be the primary venue, with Crypto.com and OG.com the main second exchange. "We'll be getting off most of our competitors," he said, adding that the vast majority of flow should run through those two by the end of the year into early next year.
Before these deals, Verma said, Robinhood sent flow to other exchanges and got no financial incentive for it. Now, he said, it becomes an owner as well, which gives shareholders some upside.
A Piper Sandler analyst asked how Robinhood reconciles routing between venues and why it holds stakes in rivals to Rothera, which it runs with Susquehanna. CEO Vlad Tenev answered that customers want choices: "I don't think we can send all of our flow to one venue." Verma said there are no conflicts, because each product is listed on a single exchange, so there is no routing as in equities or options.
Rothera's first full quarter
Tenev said Robinhood and SIG are significant equity holders in Rothera, but that it does not operate the exchange, calling it an independent business. Verma said Rothera reached $100 million or more of annualized revenue in its first full quarter of operation.
Non-sports contracts made up about 30% of prediction-market activity in the quarter, up from 15% the quarter before, Verma said. Event contracts rose about 7x from a year earlier, and event-contract average daily volumes were up about 10% so far in the fourth quarter.
Tenev said Robinhood is less interested in what he called "all sports all the time," arguing that it will get commoditized.
Quarter and what comes next
Revenue rose 12% from a year earlier to a record $1.4 billion, and adjusted EBITDA climbed 9% to a record $808 million, the executives said. Robinhood's market value was $83.5 billion.
Verma said new company-KPI contracts, which would let customers trade company-specific metrics, are awaiting final approvals and are expected in the near term.
Verma said the move of most prediction-market flow to Rothera and Crypto.com and OG.com should be done by year-end into early next year.
Sources
- Robinhood shares fall 4% as crypto slump weighs on profits, offsetting gains in new businesses — CNBC
- Robinhood shares sink on mixed Q3 results — CNBC
- HOOD Stock Drops 5% After-Hours: Robinhood’s Q3 Revenue Climbs On Prediction Markets, But Misses Wall Street Targets — Yahoo Finance
- Robinhood's quarterly profit falls as softer crypto activity outweighs robust trading - CNA — channelnewsasia.com
- Robinhood Markets Non-GAAP EPS of $0.60 misses by $0.04, revenue of $1.42B misses by $10M (NASDAQ:HOOD) | Seeking Alpha — seekingalpha.com
