Robinhood leads the prediction markets race as Coinbase plays catch-up

Joe Kernen (Co-anchor of Squawk Box) 00:00.280

Exchanges that cater to retail traders have been racing to adopt prediction markets. McKenzie Sigalos joins us now on who's in the lead. Good morning.

Mackenzie Sigalos (Technology Reporter) 00:09.480

Hey, good morning, Joe. Coinbase and Robinhood are racing to own prediction markets and the stock chart shows who got their first. Robinhood is up more than 200% this year, while Coinbase is in the red and part of that comes down to timing. Robinhood moved early on one of the

Mackenzie Sigalos (Technology Reporter) 00:24.160

stickiest new features in brokerage apps, event contracts, while Coinbase arrived later. Prediction markets let you trade on real world outcomes like elections, economic data, and sports. And Robinhood says that the product is now its fastest growing line by revenue in company

Mackenzie Sigalos (Technology Reporter) 00:39.880

history. The company says that they've got 11 billion contracts that they've traded since it launched last year. Now, both firms are using M&A to get ahead. Robinhood teamed up with Susquehanna to take a majority stake in LedgerX, giving it a CFTC regulated exchange and clearing

Mackenzie Sigalos (Technology Reporter) 00:54.920

house. Coinbase just announced its 10th deal of the year buying the clearing company prediction markets start up staff by veterans from Polymarket and Calishi. As part of its everything exchange push, so this race is really Audacity who can deliver deeper liquidity, cleaner

Mackenzie Sigalos (Technology Reporter) 01:10.800

settlement, and scale faster. And with the CFTC signaling a more innovation-friendly stance under the new administration, regulation could end up acting like a tailwind rather than a roadblock. Guys?

Joe Kernen (Co-anchor of Squawk Box) 01:23.240

Just the whole notion and and the whole basis for for how these things work is just fascinating. And I hear people call you. I've been watching CNBC later in the day. Everybody calls you Mac. I like that. Is it Big Mac? Uh Mac the Knife? Mac the Knife. Mac, what what what do you

Joe Kernen (Co-anchor of Squawk Box) 01:39.280

like? Uh have you been called Mac your whole life?

Mackenzie Sigalos (Technology Reporter) 01:42.560

It's well actually my first boss in the news business is CNN, Charlie Moore over at Anderson Cooper. He started calling me Mac and then it's stuck. All right,

Joe Kernen (Co-anchor of Squawk Box) 01:51.320

I'm going to I'm going to it doesn't take much for me to to want to start doing it. So is the is money always going to be able to predict things? I mean In betting sites, I see it all the time. Mac, I see anybody who's on the side. Doesn't matter who's playing the game. If

Joe Kernen (Co-anchor of Squawk Box) 02:07.600

everybody's on one side, that team's going to lose. It's just so weird the way it works. So, I don't see how smart money knows the right answer half the time.

Mackenzie Sigalos (Technology Reporter) 02:17.520

It's been interesting to see this surge in prediction markets. Robinhood got into it last year around the presidential election. Polymarket was super sticky before that. Kalshi, of course, another first mover there. But at this point, we're actually still just talking about a

Mackenzie Sigalos (Technology Reporter) 02:30.680

few billion dollars a week in volume. But to your point, the economics really favor scale here. Prediction markets, they are a liquidity game. So the platform that has the deepest order books and the tightest spreads are going to win because traders really want the best

Mackenzie Sigalos (Technology Reporter) 02:44.800

execution. Like for

Joe Kernen (Co-anchor of Squawk Box) 02:46.120

an election, Mac, do do you just assume that there are people that are doing this that have more granular knowledge of what's happening on the ground and swings I I mean how How does it actually work? There's There's people that are in the know? Is Is that how prediction markets

Joe Kernen (Co-anchor of Squawk Box) 03:05.600

predict correctly what's going to happen?

Mackenzie Sigalos (Technology Reporter) 03:09.120

Well, it's fascinating as you're seeing this bifurcation of who's trading event contracts. So, some people who are uh have certain bets in equity markets will actually use it a hedge against the hedge. Yeah. And then on the other side, you've got retail traders who are are just

Mackenzie Sigalos (Technology Reporter) 03:23.320

using it as a wood fandle or draft kings. I mean, you've got Robin Hood upping their prediction market offerings so that you can do the equivalent of parlay bets and combo bets on NFL games