'Turns Out The Robinhood Of Prediction Markets is … Robinhood': CEO Vlad Tenev
Robinhood accounted for about half of Kalshi's Q3 volume. Roundup: Sleeper sues CFTC; Bad Bunny drew heavy action as Super Bowl headliner on Kalshi and Polymarket a day before the announcement.
Robinhood CEO Vlad Tenev took to X this weekend to make a bold declaration:
That’s an interesting assertion, since Robinhood wouldn’t have prediction markets at all without Kalshi. Robinhood has a partnership with Kalshi that allows it to offer prediction markets, including an increasing number of sports markets.
On the other hand, you could make an argument that Tenev is correct; Kalshi almost certainly wouldn’t have reached its current scale without the Robinhood deal. Kalshi is likely to end September just shy of $3 billion in total trading volume, with a large portion of that coming from Robinhood. Reports — including the CNBC story (paywall) shared by Tenev — cited a Piper Sandler analyst saying that 25-35% of all volume comes from Robinhood.
Tenev returned to X on Monday to report that his platform has reached $4 billion in contracts traded since it first partnered with Kalshi (again, without mentioning Kalshi.) He also reported that $2 billion in contracts came via Robinhood in Q3. The $2 billion figure accounts for almost half of all trading at Kalshi, which has had $4.3 billion in volume since the start of July through Sunday night.
Kalshi hit $270 million in trading volume on Sunday, its biggest day since it started offering sports betting. Here are the top ten markets (24 hours, pegged to Eastern time):
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Prediction markets news roundup
Sleeper sues CFTC: The fantasy sports app Sleeper has sued the Commodity Futures Trading Commission (Hat tip to attorney Dan Wallach on X/Twitter). Two weeks ago, Milbank’s Josh Sterling sent a letter to the Office of the Inspector General complaining that the CFTC was “violating the law” in its handling of Sleeper’s registration as a futures commission merchant. Becoming an FCM would allow Sleeper to work with a prediction market to offer sports event contracts; Robinhood works with Kalshi as an FCM. PrizePicks, another fantasy sports app, got its FCM registration approved last week.
With things apparently not moving fast enough for Sleeper, the company filed a suit in the US District Court for the District of Columbia on Monday.
Goodwin law attorney Andrew Kim told The Event Horizon: “Sleeper faces an uphill climb in convincing the district court that it must act now. Even if Sleeper is right that the registration must be approved, there’s a fair question about whether the court should intervene now to meet the timeline that Sleeper prefers. The law says ‘shall be registered upon application,’ but it doesn’t say shall be registered immediately upon application.’”
From the complaint:
“Plaintiff Sleeper Markets LLC (“Sleeper”), through its counsel, brings this action against Defendants the Commodity Futures Trading Commission (the “CFTC” or “Commission”) and Caroline D. Pham, Acting Chairman of the CFTC, for violations of the Due Process Clause of the Fifth Amendment of the United States Constitution and the Administrative Procedure Act…”
“This case is about the CFTC flagrantly ignoring applicable law, regulations, and decades of practice to block—without process or explanation—what should have been a routine application to serve as a broker in the derivatives markets. In doing so, it is cutting off access to, and limiting the growth of, those markets without cause, and at great harm to Sleeper, which is not only being deprived of its due process rights but also losing significant business opportunities because of the arbitrary and capricious nature of the CFTC’s actions. Baffled by the obstruction of what should have been a straightforward matter, Sleeper has repeatedly sought clarity from the CFTC, which first responded with obfuscation, which quickly turned to a telling silence. With nowhere left to turn, Sleeper now seeks relief from this Court against the CFTC and its sole commissioner, Acting Chairman Caroline D. Pham.” …
“However, without any basis in the CEA or the CFTC’s rules, and in a departure from over 40 years of custom and practice, the CFTC has intruded on NFA’s FCM registration process to thwart Sleeper’s application.”
“Specifically, the CFTC has instructed NFA to not approve its application as would be done in the normal course. Instead of following the statutorily prescribed approval process, the CFTC instructed NFA to divert Sleeper’s application to the CFTC for review and approval. Based on information and belief, the CFTC has taken these unusual and unauthorized steps due to unspecified concerns about certain CFTC-regulated derivatives offered by DCMs on which Sleeper would enable its own customers to trade those products. That concern is entirely untethered from Sleeper or its application: FCMs have no say in the certification and listing of products offered by DCMs. Sleeper is not operating as a DCM and has not sought registration as a DCM. That is, Sleeper is not seeking to become a DCM in order to create products others can trade; it only seeks to provide its customers access to products offered by DCMs in accordance with the CEA and CFTC regulations.
Sterling, who is also the attorney of record for Sleeper on the complaint, has reportedly been vetted as a candidate to lead the CFTC by the White House.
Sleeper also put out a press release: “The CFTC’s unlawful actions present an unfair competitive hurdle to a growing U.S. industry,” said Sleeper’s Chief Executive Officer, Nan Wang. “This is about more than just one app. It’s about whether these innovative new American markets are truly governed by transparent and fair rules, or by a single decision maker picking winners and losers.”
Full complaint here:
Bad Bunny, the Super Bowl and prediction markets: Bad Bunny was announced as the halftime performer of the Super Bowl on Sunday night, which is news for this newsletter in that people trade on this event at both Kalshi and Polymarket. Someone started betting on Bad Bunny on Saturday, and that in turn created more activity in the market.
You can see from Kalshi’s site that activity started ramping up on Saturday evening, with money coming in on Bad Bunny:
By the end, almost $5 million was traded on the Super Bowl headliner at Kalshi. You can also see a similar spike at Polymarket, where there was far less volume:
Was this someone with inside information or just someone who really thought Bad Bunny would get the nod? That’s impossible to know on the outside looking in. But given the timing just a day ahead of the announcement, it’s also difficult to believe the initial steam didn’t come from someone who knew something.
The top-level rule from Kalshi Trading Prohibitions is: “Pursuant to Kalshi Rule 5.13(s), you are prohibited from participating in a contract if you ... have material non-public information regarding this contract...” If someone did have early information, they apparently shouldn’t have been able to trade the market… but it’s also impossible for us to know if that is the case. For a prediction market, having surveillance that would be able to catch insider trading on a market like this would be extremely difficult until after the fact.
In some prediction markets, there is sometimes a point at which a decision has been made behind the scenes, while the market is still open for “predicting.” There was obviously some group of people who knew that Bad Bunny would be performing before the announcement came.
Will any of this matter? Probably not. It would take Kalshi (or Polymarket) wanting to investigate the matter. But it’s interesting!
Kalshi, Polymarket CEOs to speak today at roundtable: As I noted in Friday’s roundup, Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan are appearing at today’s “SEC-CFTC Roundtable on Regulatory Harmonization Efforts.” Their panel is scheduled to start at 2:10 pm Eastern. You can watch here.
Kalshi’s Rise Shakes Up NFL Sunday (Wall Street Journal): “Prediction-market startup Kalshi made its name by giving political junkies a way to bet on last year’s presidential election. Now, it’s making a play for football fans.
The firm has emerged as a competitor to much larger sports-betting platforms such as DraftKings and FanDuel. Bettors can trade contracts on the outcomes of football, basketball and other games through Kalshi’s app as well as Robinhood, the brokerage that popularized bets on meme stocks.”
Interesting nugget at the end: “CJ Roberts, a 19-year-old in Ohio, recently made about $200 betting against his hometown Cincinnati Reds. Back in May, he picked the New York Knicks to make the NBA Finals. He went to sleep when the Knicks led by double digits late during Game 1 of the Eastern Conference Finals, but woke up the next morning to see most of his unrealized gains had disappeared with the Knicks’ lead. Roberts isn’t old enough to use a traditional sportsbook in Ohio. He thinks Kalshi should have the same age limit, even though that would restrain him. ‘Kids come on there and they don’t understand, and you can lose money very fast,’ Roberts said.”
Kalshi Says It ‘Conducts No Business Whatsoever On Indian Lands,’ Points To UIGEA Exception, In Response To Tribes (InGame): “Kalshi revived an old-school argument that was popular with offshore gaming sites in the 1990s and early 2000s, as the prediction market argued that accepting bets from a specific jurisdiction doesn’t mean it does business there, and cited a carve-out within the Unlawful Internet Gambling Enforcement Act (UIGEA). However, it’s not clear that the UIGEA exception it cites is actually relevant when it comes to determining where Kalshi does business. The prediction market filed a response motion Thursday in the U.S. District Court for the District of California, after three of the state’s tribes — The Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians — sued the prediction market, as well as its partner Robinhood, in July. The tribes accuse Kalshi of unlawfully offering sports betting on their lands in violation of the Indian Gaming Regulatory Act (IGRA).”
The Story Behind Building Kalshi | Tarek Mansour (HD in HD podcast): This was a two-hour podcast with Mansour, but it now says “This video is no longer available because the YouTube account associated with this video has been terminated.”
Wow, the numbers here are staggering! Robinhood accounting for 50% of Kalshi's Q3 volume shows just how much distribution matters in prediction markets. Tenev's assertion that Robinhood is "the Robinhood of prediction markets" is bold but not unreasonable - without Robinhood's UX and user base, Kalshi would be a fraction of its current size. The fact that someone was betting on Bad Bunny the day before the announcement raises some interesting questions about insider trading surveillance in prediction markets. You're right that it would be extremely difficult to police this in real-time. As prediction markets grow, this kind of thing will become more common unless there's robust surveillance. The Sleeper vs CFTC case is fascinating too - Sterling arguing that FCM registration is being weaponized to control which products can be offered is a pretty agressive regulatory challenge. Great roundup of all the prediction market developments!