Robinhood to Introduce Checking and Savings Accounts

[disneysteve]

Prediction markets, a.k.a. information markets, idea futures, or event futures, provide a platform for participants to trade contracts representing future (thus "prediction") events. They employ a continuous "double auction" to determine the probability of an event. The trading mechanism matches buyers and sellers, causing contract prices to rise or fall based on how likely the event seems to the participants to be at that moment in time. So the contract price fluctuates based on public sentiment and information and the price reflects "the crowd's" collective belief about the probability that the event will or won't happen.

Is it gambling? We like how Andrew Tottenham, a British casino consultant with decades worth of experience, puts it. "When they first appeared, companies like Kalshi were quite open in their language, marketing their product as betting. But as the backlash mounted and lawsuits and cease-and-desist letters from several U.S. states began rolling in, the vocabulary shifted. Now, "gamblers" are "traders," “betting” has become “trading,” and “bets” have become “event contracts.&#8221

What a load of crap. They are running an illegal gambling operation. I hope they get shut down soon.

[QuarterMillionMan]

I hope Robinhood can keep it going but somehow it seems like Robinhood is skirting the law. It is my only option to bet on sports since in California it is not yet legal to do so albeit a lot of other states have legal sports betting. Draft Kings has fantasy sports but it is not the same thing. At any rate here is part 2 from the Las Vegas Advisor about it.

In yesterday's QoD, we explored the history of prediction markets and their legality in the U.S. Today, we explain how you make a bet on these platforms.

The choices are generally binary: "yes" and "no" contracts. Yes contracts rise and no contracts drop in price as an event becomes more likely. Contracts typically pay $1 if the event occurs and $0 if it doesn't, making the contract price a real-time indicator of the market's collective prediction. Participants profit if they correctly predict the outcome (i.e., sell a contract at a higher price than they bought it for or receive $1 at settlement) and lose money if they're wrong.

As such, prediction markets harness the intelligence of numerous participants, often providing more accurate forecasts than traditional polls or individual expert opinions. After all, the contract buyers and sellers are financially motivated to be truthful in their predictions in order to generate a profit, creating a put-your-money-where-your-mouth-is system.

The trades, typically, concern election outcomes; economic markets; such as predicting future indicators like inflation, unemployment rates, and interest rate changes; and now sports betting. Our understanding is, now that prediction markets have entered the sports betting arena, a majority of the contracts are traded over sports futures.

Here's an example of a sports trade.

A market is created on the odds that the Kansas City Chiefs will win the Super Bowl. The yes-no contract puts it thusly, "Will the Kansas City Chiefs win the Super Bowl?"

When the contract opens for trading early in the season, the price is based on public sentiment. Let's say the market prices a Yes contract at $0.25 (meaning a 25% perceived chance that the Chiefs will win the Super Bowl) and a No contract at $0.75 (a 75% chance that they won't). You believe the Chiefs are undervalued and have a better-than-25% chance of winning, so you buy 100 Yes contracts for a total of $25.

Several weeks into the season, the Chiefs go on a losing streak. The perceived probability of their winning the Super Bowl drops. So the price of a Yes contract falls to 17 cents. The No contract rises in price.

Taking advantage of the dip, you buy low and pick up another 100 Yes contracts for $17. Your average purchase price is now 21 cents per contract.

Late in the season, the Chiefs are on a winning streak and the price of a Yes contract climbs to 40 cents. You believe this price is inflated and lock in some profits before the Super Bowl by selling 50 of your contracts for $0.40 each, earning $20. You now have 150 contracts remaining, at an average price of around 14 cents.

When the Chiefs win the Super Bowl, the prediction market pays you $1 for each of your 150 winning contracts, for a total payout of $150.

So how'd you do?

You invested $42 ($25 + $17). When you sold back $20 worth of contracts, your net investment was $22 ($42 - $20). After receiving your $150 payout, your total profit was $128 ($150 - $22).

Good work!

There are commissions involved with each trade, which is how the operators of the market, or exchange, make their profit. But commissions can be as low as 1%-2%, making this a better deal than the standard 11/10 sports book arrangement and one of the selling points being used to draw market share from the sports books.

[kork13]

That sounds alot like how Japanese pachinko parlors skirt the anti-gambling laws. People play games & win physical prizes like teddy bears & toys (prizes for games = legal ... Cash for games = illegal). But then on your way out the door, there's a very helpful character who offers to buy your prizes off of you, whereupon you walk away with a stack of cash. Most of them are run by the Yakuza (mafia) anyway .... Best to stay away (which is why the base has them as off-limits).

[QuarterMillionMan]

I've always wondered how those pachinko games worked, interesting.

There had to be more to it than winning those silly stuffed animals.

[QuarterMillionMan]

A liquor store near me has a few slot machines which has a sign saying "for entertainment only." But I had asked the owner if I won something would he pay me and he nodded yes, so I played a little but I'm pretty sure he set the payout to maybe the bare minimum. In Las Vegas the gaming control board sets a minimum at let's say 85% return. The liquor store owner can set his own return at maybe 30% return.

[disneysteve]

It is interesting that you can buy and sell your "bets" that way. That's very different than legal sports betting. You can go there to bet on the Chiefs to win the Super Bowl but that's it. Either you win or you lose. Nothing happens between the time you make your bet and the time the game occurs. The only way to make money is for your team to win.

Personally, I'm not opposed to the gambling that Robin hood is offering in theory. I just really doubt that it's truly legal. I'd also be concerned with how well, if at all, it is being monitored and regulated to make sure nobody is messing with the odds and the numbers. Legal gambling is tightly regulated.