Robinhood's vertical integration strategy with Susquehanna is rewriting the rules of the prediction market.

Local time on December 16, Robinhood officially held a themed event called 'YES/NO', which is not only a deep upgrade of its prediction market business but is also seen by the market as a 'public declaration of war' against traditional gambling giants and existing prediction platforms.

Institutions like Bank of America warn that this 'tech' giant's dimensionality reduction attack on 'traditional' gambling companies may force a fundamental reversal in customer acquisition costs and fee standards across the entire industry.

01 Vertical Integration Strategy

On November 2025, Robinhood announced a strategic partnership with market maker giant Susquehanna to acquire a 90% controlling stake in the derivatives exchange MIAXdx. This strategic move aims to create a federally regulated derivatives and prediction market trading platform, with the transaction expected to be completed in early 2026.

The core highlight of this deal lies in Robinhood's acquisition of an exchange license and its partnership with a leading market maker, showcasing its fully autonomous, vertically integrated trading ecosystem. By eliminating third-party platform fees and leveraging 'zero commission' and deep liquidity advantages, it aims to push event contracts into the mainstream retail market.

The new exchange will be managed by a joint venture established by both parties, with Robinhood as the holding party and Susquehanna acting as the liquidity provider from the first day of trading. The goal is to expand Robinhood's rapidly growing 'prediction contract' business, covering a wide range of events from sports to elections.

02 Rise of Prediction Markets

Prediction markets are fundamentally different from traditional fixed-odds betting. They are based on 'peer-to-peer' pricing among users, with prices reflecting real-time changes in the collective expectations of market participants, thus providing more event betting options that traditional gambling companies cannot cover.

In March of this year, Robinhood partnered with KalshiEX, which is regulated by the U.S. Commodity Futures Trading Commission, to launch a 'Prediction Market Center' within its app. This feature quickly became Robinhood's fastest-growing revenue project. The third-quarter financial report indicated that the number of contracts traded by customers in this sector reached 9 billion, with over 1 million users participating.

With the acquisition of the Luxembourg cryptocurrency exchange Bitstamp in June of this year, Robinhood's annualized revenue from prediction markets is expected to exceed $100 million in less than a year.

03 Traditional Gambling Industry Under Pressure

Bank of America analyst Julie Hoover warned: 'Online sports betting investors seem to view any negatives for Kalshi as positives for online sports betting operators, but we see increased investment from large tech companies like Robinhood as a competitive threat to DraftKings and FanDuel.'

The traditional gambling industry is facing multiple challenges simultaneously. In Macau, the expiration of gaming licenses and the rise of online gambling are presenting dual tests. The six gaming licenses in Macau are about to expire, and a new round of license bidding is on the agenda.

At the same time, online gambling is gradually penetrating the Macau gaming market, with platforms like Sun City attracting a large number of gamblers from mainland China, forming a combined online and offline operation model. This touches on the interests of traditional license holders in Macau, sparking a renewed discussion on future license auctions and market structure.

The former most glamorous casino, the Macau Emperor Palace, has recently been forced to close due to a net loss of 248 million HKD. In the fiscal year 2025, the casino's net loss reached 248 million HKD, turning from profit to loss, with the scale of losses expanding by more than 300 million HKD compared to the previous year.

04 Regulation and Market Outlook

The prediction market business still faces significant legal uncertainties. A federal judge in Nevada ruled that Kalshi must be subject to gaming regulators' jurisdiction and must stop offering sports contracts in the state. The same judge also denied Robinhood a temporary restraining order to prevent Nevada's gaming regulators from taking enforcement action against the brokerage.

It is worth noting that MIAXdx has received CFTC approval to list and clear fully collateralized futures, futures options, and swap products. This acquisition will lay a more complete infrastructure capability for Robinhood's future derivatives and prediction market business.

Meanwhile, several companies interested in prediction markets have acquired U.S.-regulated derivatives exchanges and begun to offer competitive contracts. DraftKings acquired an exchange and incorporated it into its own platform, while FanDuel partnered with the CME to create a new platform for betting on sports and other events.

Summary:

As the trading frenzy in prediction markets continues to heat up, 'prediction exchanges' that allow investors to bet on the outcomes of real-world events are rapidly gaining traction. Wall Street investment bank Bernstein described prediction markets as a viable asset class, pointing out that this seemingly novel market is evolving into a part of the mainstream financial system.

Traditional gambling companies must rethink their business models; otherwise, they can only watch as tech giants capture market share with lower costs, wider coverage, and stronger user engagement. This battle has just begun, but the rules of the game have been completely changed.