Robinhood Derivatives, LLC, a wholly-owned subsidiary of Robinhood Markets, Inc. (HOOD Quick QuoteHOOD - Free Report) , is set to launch a prediction markets hub directly within the Robinhood app, allowing customers to trade on the outcomes of several major global events, including the expected upper limit of the Federal Reserve funds rate in May.

In light of this development, Robinhood’s shares surged 7.1% in yesterday’s trading session.

Prediction markets function within a regulated framework and leverage the financial market structure to boost liquidity, transparency and price discovery. Initially, the prediction markets hub will be available across the United States through KalshiEX LLC, a Commodity Futures Trading Commission-regulated exchange.

Rationale Behind Robinhood’s Prediction Markets Hub Launch

Event contracts gained traction when Robinhood launched it in October 2024, just before the U.S. Presidential elections. These contracts had an enormous success, with more than 500 million contracts traded within a week of launch.

Similarly, Interactive Brokers Group, Inc. (IBKR Quick QuoteIBKR - Free Report) , one of HOOD’s peers, has been actively expanding its event contract offerings in recent months to capitalize on rising demand. IBKR first introduced event contracts in October 2024, starting with the U.S. election results.

These contracts allow traders to bet on particular outcomes, providing opportunities to gain from predictions on a range of events including sports, entertainment, politics and the economy.
 
The launch of the prediction markets hub aligns with Robinhood’s objective to become a full-service financial firm and compete with dominant derivatives brokers.

JB Mackenzie, vice president & general manager of Futures and International at Robinhood, stated, “We believe in the power of prediction markets and think they play an important role at the intersection of news, economics, politics, sports and culture.”

HOOD’s Zacks Rank & Price Performance

HOOD shares have surged 84.2%, outperforming the industry’s 11% growth in the past six months.

Image Source: Zacks Investment Research

Currently, Robinhood sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Initiatives by Other Finance Firms

Last month, State Street Corp. (STT Quick QuoteSTT - Free Report) agreed to acquire global custody and related businesses outside of Japan from Mizuho Financial Group, Inc. (MFG Quick QuoteMFG - Free Report) . These businesses aid the international investments of Mizuho’s Japanese clients.

Following the completion of the deal, STT will partner with Mizuho Financial to support its Japanese clients with global custody and related services. Meanwhile, MFG will continue to offer trust and custody services for domestic assets within Japan, capitalizing on its expertise and network.