A research firm suggests that Robinhood (NASDAQ: HOOD) should concentrate its possible venture into sports betting on event-style contracts instead of traditional products. 

In a recent analysis, Eilers & Krejcik Gaming (EKG) emphasized the challenges encountered by newcomers in the realm of conventional sports betting, using Penn Entertainment’s (NASDAQ: PENN) ESPN Bet as the example. The research organization observed that although ESPN Bet might increase its market share in 2025, it only held 1.5% of the US sports betting market in gross gaming revenue (GGR) by the end of November, highlighting the challenges new rivals encounter in breaking into the duopoly formed by DraftKings and FanDuel.

"That should arguably inform Robin Hood as it looks for a way into the sports betting market. Taking on a traditional sports betting path, even via acquisition, looks to be a hard and expensive slog,” according to EKG.

The research company mentioned that having a substantial customer base — Robinhood boasts 24.2 million funded users, with nearly half engaging on a monthly basis — does not guarantee success in sports wagering. 

Robinhood's Sports Wagering Strategy 

Earlier this month, CEO Vlad Tenev stated during Robinhood's investor day that the brokerage is exploring options for entering the sports betting market, but no specific plans were presented. 

The announcement came just under two months after the trading firm launched its election betting service, which was accessible solely to US clients who were authorized for margin investing and Level 2 or 3 options trading. Those "bets," favored by eligible clients, were designed as event contracts rather than conventional wagers. 

Consequently, market analysts conjectured that if the financial services company seriously engages in sports wagering, it would do so through event contracts rather than the sides, totals, and other types of bets seen on specialized sports betting sites. US regulators categorize event contracts as derivatives, indicating distinct differences compared to traditional sports betting. 

“An event contract is a type of financial derivative that allows traders to speculate on the outcome of a specific event. These contracts are generally structured around ‘Yes’ or ‘No’ outcomes, and fluctuate in price based on the projected outcome of the event,” according to Robinhood. “Event contracts then pay out if the position held matches the correct outcome of the event (for example, which candidate will win the 2024 presidential election); otherwise, they expire worthless.”

For Robinhood, Event Contracts Might Be the Best Option. 

Regulatory guidelines concerning event contracts and the possibility of attracting a wider client base are some of the benefits that Robinhood and other brokerage firms might discover with event contracts. 

“CFTC rules say futures contracts must provide genuine economic hedging utility and price discovery utility. Some longer term sports contracts like season win totals or season-long player props arguably fit that bill, and could be a logical starting point for Kalshi and then Robin Hood,” observed EKG.

Kalshi has recently secured the ability to provide event contracts for US elections, and this opportunity extends beyond the state level, unlike competitors like DraftKings, FanDuel, and others. Last week, the cryptocurrency trading platform Crypto.com announced that it will be providing contracts for sports events, including the Super Bowl and other sports markets, indicating a potential expansion of this offering in 2025. That made headlines since it’s the first instance where bettors are allowed to use digital currencies for purchasing sports derivatives, yet winnings are disbursed in dollars.