Any…predictions…? On August 19, 2025, Robinhood, whose slick user interface and commission-free trades made it famous, announced in partnership with Kalshi, a US CFTC-regulated exchange, that NFL and NCAA football games markets would be offered. It gives a user an opportunity to buy and trade contracts on the outcomes, such as whether Liverpool beats Chelsea or whether a rugby game scores over 30 points, hence carving out a new “asset class” for retail investors, notwithstanding this overlap with gambling. Stocks in the United States of America have given Robinhood a mechanism to commercialise outcome events and sports in a wide realm, from football in England to cricket in India, with all seriousness, but almost jokingly: So is this a smart re-imagination of investing, or is it just sports betting under a financial guise?
How Prediction Markets Function
The mechanics of prediction markets are straightforward yet captivating, blending the structure of trading with the excitement of a wager. A user can invest, say, £10 in a contract to predict a Manchester United victory, receiving £1 per contract if the prediction is correct or losing their stake if incorrect, with these prices fluctuating according to the demand in the peer-to-peer market, unlike ordinary betting, where a bookmaker sets the odds. The first half of 2025 saw Kalshi-powered markets conduct over $2 billion worth of contracts relating to sports events, with much of that volume coming during March Madness itself, although no publicly available figures are quoted for that single event. While these markets are regulated by the CFTC in the US, they do face opposition, as cease-and-desist orders have come from seven states, claiming these to be akin to sports betting, thereby complicating the assertion of their status in all 50 states. Whether they will continue further into other lands like the UK, where the Financial Conduct Authority (FCA) governs, remains uncertain, generating curiosity as to how global regulators will eventually classify this finance-fun hybrid.
The Investment Narrative Behind Prediction Markets
For Robinhood, the narrative sets the prediction market as a bona fide avenue of investment, touting their handling of $300 million worth of election event contracts in 2024, indicating that sports might be the next arena for retail investors worldwide. JB Mackenzie, VP at Robinhood, emphasised that football is a great fit for their platform in view of its universal appeal, but the revenue model of the app is based on transaction fees, with options fees surging 83% year-on-year in Q4 2024, which incentivises frequent trading rather than long-term wealth-building. One trader from Sydney described how the never-ending notifications of a similar app provided a constant distraction that led to the trader making very rash decisions, culminating in $400 in losses in a matter of days, highlighting how the gamified nature of Robinhood, while initially engaging, eventually fosters reckless behaviour. In the case of an investor dabbling in prediction markets, first, always consider discretionary funds so that speculative interests do not become a hindrance to overarching financial goals.
Risks and Challenges of Prediction Markets
Prediction markets have a significant degree of risk associated with them, and the sporting venues tend to provide numerous thrill-inducing opportunities for the downside. Cases of addicts using sports betting platforms highlight the dangers of the gamified model, and although the 2023 story from The Athletic about a UK-based punter losing large sums on football bets could not be substantiated, it brings to light the dangers that could be magnified through Robinhood’s interface. Unlike diversified options like an FTSE 100 index fund that yields an average return of 7% annually over a few decades, event contracts have binary payouts – if the event happens, you win, but if it does not, you lose everything. Regulatory clarity appears a far way off as seven US states are currently challenging Kalshi’s markets for resembling sports betting, while California is home to Native American tribes suing Robinhood and Kalshi over tribal gaming rights. In the UK, mobile trading apps are all the rage, so should any prediction market find its way over, the FCA and Gambling Commission may be looking at it – typical, eh? So, should one wish to venture into this field, a prudent move would be to regularly check relevant regulatory websites to see what’s up in this new area.
Global Trends in Retail Investing
The action carried forth by Robinhood is part of an overarching international trend in retail investing wherein financial apps employ game mechanics to get the younger generation interested in money management – from Berlin to Bangalore. While it is not possible to tell precisely how many users trading apps will have in Germany and Australia in 2024, the UK has witnessed a surge in users in recent years. This rise can be attributed to the emergence and popularity of Freetrade and Trading 212, which follow the Robinhood style of commission-free trading. A 2021 report by the Behavioural Insights Team and Ontario Securities Commission said that gamification featuring giving points for trades led to a 39% increase in trading frequency, though such activity sometimes led to reduced returns as the traders tended to trade excessively. The 12% return reduction figure has not yet been substantiated. These prediction markets could be copied globally and threaten to become an issue for regulators such as the FCA or ESMA of the EU, who must try to strike a balance between innovation and customer protection. A Berlin trader earning 20% across Kalshi’s election contracts came with a warning that these contracts were quite addictive and implied using platforms like Vanguard or Interactive Investor instead, which are set up with an educational angle and a focus on long-term planning.
Safeguarding Financial Stability
Navigating this new era demands discipline and clarity. Only consider for prediction markets those funds that can be used at your discretion, and if you consider investing in derivatives, be sure to search the FCA consumer website as part of your research. Diversify between stocks, bonds, and savings accounts in the meantime. A Singapore trader, after losing SGD 500 on bets, now limits speculative trades to 10% of their portfolio, favouring index funds for stability. Disabling app notifications curbs emotional trading, while platforms like Moneybox offer automated savings for steady growth. The contrast between traditional investing and prediction markets is clear: a Canadian investor grew $1,000 to $1,300 over five years in an ETF, while another lost $1,000 on sports bets in months, emphasising the need for caution.
The Future of Retail Investing
Robinhood’s prediction markets, backed by its 26.7 million funded accounts compared to FanDuel’s estimated 7 million, position it to mainstream this trend globally. Yet, as US regulator Bill Galvin noted, this could be a “marketing ploy” to blur investing and gambling, a concern resonating in markets like the UK, where apps like Trading 212 flourish. Regulators worldwide face a dilemma: should prediction markets be treated as financial instruments or gambling products? Staying informed through FCA or CFTC updates, focusing on diversified portfolios, and choosing platforms prioritising education over excitement is key. Robinhood’s experiment may reshape investing, but its success depends on whether it fosters wealth-building or merely fuels speculative thrills, leaving global markets to ponder the future of retail investing.