Robinhood Launches 'Custom Combos' in Prediction Markets as U.S. Gambling Expands

Robinhood is offering a new feature called 'Custom Combos' for its prediction market users, allowing them to place wagers on multiple outcomes simultaneously according to Decrypt. The offering, launched as the NFL postseason approaches, represents a key step in expanding Robinhood's footprint in the gambling space according to Decrypt. These contracts are regulated by the Commodity Futures Trading Commission and are structured differently from traditional parlays offered by firms like Draft Kings and FanDuel according to Decrypt.

The platform partners with Kalshi to facilitate these wagers, which can include up to 10 different predictions at once according to Decrypt. Unlike traditional betting platforms, where odds are set unilaterally by the 'house,' Custom Combos rely on market makers who submit quotes to take the other side of wagers through a process called Request For Quotes according to Decrypt. This mechanism is designed to make the market more dynamic and participant-driven according to Decrypt.

Robinhood claims prediction markets are its fastest-growing product line by revenue according to Decrypt. The feature's introduction aligns with the growing popularity of sports betting in the U.S., particularly during high-profile events like the NFL playoffs according to Decrypt. The company is marketing Custom Combos in all U.S. states except Maryland and Nevada, where prediction market access is restricted according to Decrypt.

Why Did Robinhood Launch Custom Combos Now?

The timing of the launch coincides with a surge in legal sports betting across the U.S. according to Decrypt. The NFL postseason is known for attracting a large number of bettors, and Robinhood aims to capture that interest with its new offering according to Decrypt. The company's CEO, Vlad Tenev, has emphasized that prediction markets could redefine the future of finance and news according to Decrypt.

Kalshi, the prediction market platform Robinhood uses, has seen significant growth in trading volume, particularly in sports-related markets according to Decrypt. The platform reported $1.8 billion in sports-related trading volume as of this past week according to Decrypt. This increase highlights the potential market size for Robinhood's new feature.

What Are Analysts and Regulators Watching?

The introduction of Custom Combos has raised questions about how prediction markets should be regulated according to Decrypt. Critics argue that platforms like Kalshi and Robinhood are operating in a gray area, offering services that resemble traditional gambling but claiming they are financial instruments according to Decrypt.

Legal challenges are brewing across the U.S., with some states and lawmakers questioning whether these platforms are subject to local gambling laws according to Decrypt. Robinhood maintains that its Custom Combos are not gambling but rather financial tools for information discovery according to Decrypt. The company's spokesperson emphasized the technical nature of the RFQ process, which requires a higher level of participation from users according to Decrypt.

Analysts at Compass Point have become more bullish on Robinhood, citing the growing interest in prediction markets and sports betting as a tailwind for the company according to Decrypt. The firm charges a one-cent fee per contract traded on its Kalshi-powered platform according to Decrypt.

How Do Custom Combos Differ from Parlays?

Traditional parlays are bets that combine multiple outcomes into a single wager, with the payout increasing based on the number of correct selections according to Decrypt. The key difference with Custom Combos is that the odds and payouts are not set by the platform but are instead determined by market makers who submit quotes according to Decrypt. This approach makes the outcomes more dynamic and less predictable for the user according to Decrypt.

Parlays are becoming increasingly popular in the U.S., with 30% of Americans using them for sports betting as of 2024 according to Decrypt. This has raised concerns about loss-chasing behaviors, as bettors often stack multiple outcomes in hopes of a larger payout according to Decrypt.

Robinhood's approach to Custom Combos requires a deeper understanding of market mechanics, which may appeal to a more sophisticated audience according to Decrypt. However, it also introduces a steeper learning curve for casual bettors according to Decrypt.

What's Next for Robinhood and Prediction Markets?

The company is positioning itself as a leader in the prediction market space, with plans to expand its offerings into other areas according to Decrypt. The NFL postseason is just one of several opportunities for growth, as other major sports events, such as college football and the Olympics, also draw significant betting interest according to Decrypt.

The expansion of prediction markets also raises broader questions about their role in the financial ecosystem according to Decrypt. Some argue that they provide valuable insights into market sentiment, while others see them as a form of unregulated gambling according to Decrypt.

Robinhood's stock price has risen 140% over the past year according to Decrypt. The company's shares were trading at $110 on Friday according to Decrypt. This growth has been driven in part by its innovation in the prediction market space and its appeal to a new generation of investors according to Decrypt.

As the U.S. continues to expand its legal sports betting landscape, Robinhood's Custom Combos represent a significant step in the evolution of financial instruments for betting and prediction according to Decrypt. The company's ability to navigate regulatory challenges and scale its offering will be closely watched by investors and industry observers.