Robinhood (HOOD) stock popped 8% on Wednesday as the trading platform said it would expand its fastest-growing product line, prediction markets.
Shares of the online broker jumped after the company announced the launch of a futures and derivatives exchange with market maker Susquehanna International in order to expand its prediction-market offerings, a service where users can bet on outcomes ranging from sports results to Federal Reserve interest rate decisions.
Robinhood began offering prediction market services last year through a partnership with Kalshi. Since the offering’s launch, 9 billion contracts have been traded by more than 1 million users, according to Robinhood.
Bernstein analysts said on Wednesday that Robinhood will likely continue to distribute Kalshi products, but the new initiative will allow the company to supplement more event contracts directly.
Shares of Robinhood are up 215% year to date, making it the second-largest gainer on the S&P 500 (^GSPC) this year. The stock was added to the index in September.
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“With HOOD already accounting for more than 50% of Kalshi market volumes, we believe, HOOD wants to leverage its distribution edge to claim a higher share of the market revenue pool,” Bernstein analyst Gautam Chhugani and his team wrote. The firm has a Buy rating on the stock with a $160 price target.
“HOOD’s active trader base of 14 million provides the perfect demographic and product market fit for prediction markets, allowing it to make more aggressive power moves to capture its rightful share of the revenue pool,” added the analyst.
Bernstein estimates the platform is on pace to bring in more than $300 million from event contracts on an annualized rate.
In the deal, Susquehanna will serve as a liquidity provider, which is essential for price stability in trading.
“By introducing a robust, institutional-grade exchange to the market, we’ll add more choices for consumers. We’ll also gain the flexibility to build faster and deliver more contracts and services to traders,” said Robinhood in its announcement.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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