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Robinhood Bets on Prediction Markets with FTX-Linked Acquisition

Robinhood Markets is making a bold move into the burgeoning prediction markets space, acquiring a 90% stake in LedgerX, a company with ties to the collapsed cryptocurrency exchange FTX.

The deal, which also involves trading firm Susquehanna International Group, comes just as Robinhood launches its own futures and derivatives platform with options for prediction markets. The acquisition of LedgerX, one of the few solvent FTX-linked entities, could position Robinhood to challenge established players like Kalshi and Polymarket.

"Through our retained equity stake, the transaction announced today will provide MIAX with access to the growing prediction markets on an expedited basis," said Thomas Gallagher, CEO and chair of MIAX, which previously owned LedgerX.

Prediction markets, where participants bet on the outcomes of future events, have surged in popularity in recent years, driven in part by interest in wagers on US elections. Kalshi, for example, reportedly increased its valuation to $11 billion last week after a funding round led by heavyweight investors Sequoia Capital and CapitalG.

Robinhood's move reflects the fintech firm's ambitions to diversify beyond its core retail brokerage business, which has faced headwinds as trading activity has cooled from pandemic-era highs. The acquisition of LedgerX, which is licensed by the US Commodity Futures Trading Commission, could also help Robinhood navigate the complex regulatory landscape around prediction markets.

"This transaction is an important step in Robinhood's strategy to build differentiated products and services for our customers," said Vlad Tenev, Robinhood's CEO and co-founder.

The deal comes at a critical juncture for the prediction markets space, with Coinbase also reportedly working on its own offering. Regulatory approvals have been a hurdle, but Polymarket scored a win this week as the CFTC gave the green light for the company to operate a US-intermediated trading platform.

Industry experts say the rise of prediction markets reflects growing demand for alternative investment vehicles, as well as a desire to harness the "wisdom of the crowd" to forecast future events. But the space has also faced scrutiny over potential for abuse and market manipulation.

Robinhood's foray into this arena is a high-stakes bet that its brand and retail investor base can help propel prediction markets into the mainstream. With seasoned players like Kalshi and Polymarket already staking their claims, Robinhood will need to move quickly to carve out a meaningful position in this fast-evolving market.