Trading platform Robinhood (HOOD.O) on Monday launched a prediction markets hub in its app that allows customers to trade on event outcomes, including the expected upper limit of the Federal Reserve funds rate in May.
The company, which has become synonymous with retail investors in the U.S., is looking to cash in on the growing demand for event-based derivative contracts, once a niche asset class.
Event-based derivatives are gaining traction as traders seek to bet on real-world outcomes, such as Fed decisions or elections, offering a straightforward, all-or-nothing payoff tied to specific events.
However, the rise of event-based derivatives trading has drawn regulatory scrutiny, with concerns over gambling-like risks and the potential for market manipulation.
Robinhood shares were last up 1.7% in premarket trading on Monday.
In February, Robinhood scrapped event contracts allowing users to bet on the Super Bowl outcome just a day after launch, following a request from the U.S. Commodity Futures Trading Commission.
The move came after its wildly popular launch of contracts to bet on the U.S. presidential election in October.
Robinhood said it has been in close contact with the CFTC in recent weeks and looks forward to continuing to work with the regulator.
"Businesses and investors can use these markets to hedge against uncertain events and associated risks, such as election outcomes, regulatory changes, or economic shifts," Robinhood said in a recently released policy statement on the products.
The launch furthers the trading platform's strategy of evolving into a comprehensive financial services provider and competing with established brokerages catering to institutional clients.
Its prediction markets will initially be available across the U.S. through KalshiEX LLC, a CFTC-regulated exchange, the company said.
Robinhood added that eligible customers will also be able to bet on the results of the upcoming men's and women's college basketball tournaments.
