A popular stock trading app’s attempt at U.S. election betting, among other incentives, isn’t winning over investors.
Trading platform Robinhood Markets Inc., which recently launched presidential election event contracts, saw its stock fall 14% on Thursday following its third-quarter release.
Robinhood, which grew in favor during the COVID-19 pandemic stock meme frenzy, jumped on the election wagering train started by Kalshi by offering customers an opportunity to buy and sell “Yes” contracts on the next President, Republican Donald Trump or Democrat Kamala Harris.
That incentive, along with a Robinhood credit card, a desktop trading platform, and enhanced options trading opportunities, is supposed to attract more business.
Robinhood announced that while total Q3 revenue of $637 million was up 36% year-over-year, it was down from Q2’s $682 million.
Just getting started
Still, the company’s CEO was pleased with how the quarter went for Robinhood.
“I'm really proud of our Q3 results and how smoothly our product engine is humming,” Vlad Tenev, also a Robinhood co-founder, said in Wednesday’s quarterly release. “In the past month, we introduced Robinhood Legend, our new desktop offering, and announced index options, futures, and a realized profit and loss tool are coming soon. And just this week, we launched our Presidential Election Market. We have a ton of momentum, and we’re just getting started.”
The market wasn’t as bullish this time around. However, the third-quarter stock drop followed a period of great growth for Robinhood. Shares had risen 120% this year as the company looked to catch Fidelity and Charles Schwab, more established brokerages.
Analysts at J.P. Morgan told Reuters that Robinhood’s third-quarter decline was a “seasonal declaration,” and the stock drop was not surprising.
Plenty of competition
It remains to be seen how much this form of election betting takes hold and helps companies offering it grow. Not only is Robinhood competing with Kalshi and presidential contracts, but other trading platforms like Interactive Brokers and PredictIt jumped on board as well.
Regulators and lawmakers in the legal U.S. sports betting market don’t allow operators to offer U.S. election odds. Kalshi’s event outcome platform was able to hold off the U.S. Commodity Futures Trading Commission and offer election-related contracts, which act like wagers, in plenty of time for Tuesday’s Election Day.
At Robinhood, traders can purchase a contract on one Presidential candidate or the other for $0 to $1. Once the new President is certified by Congress, customers who hold onto their position will be paid a full dollar or not based on the outcome.
