Are prediction markets gambling? Robinhood's Vlad Tenev is betting not

26:11So with all prediction markets, since we're not a designated contract market, we rely on the DCMs to list contracts. And once it's listed by a DCM, which again is the exchange in CFTC land, we can list them on our platform. So our view is we want to list all prediction markets. We believe that they have societal value in addition to any value they have as a trading asset for our traders. We think they're a better source of information. So obviously, the line between prediction markets and what should be federally CFTC regulated and what should be under the purview of states who have gaming, which is regulated and taxed at a state level, that line is going to be debated right now.

27:05And I think Robinhood's a big part of that because we believe in prediction markets. That's kind of the intersection here, particularly with sports. So while we believe that these are CFTC regulated products, we also recognize that this issue has to be debated and worked out. And it's not very, very clear. So for that reason, we decided to respect the state of New Jersey's demand to halt operating for its citizens, even though we disagree with it. We're going to work it out. Over the next couple of months, we'll be in conversations. But as you can imagine, there's a lot of states. There's a lot of people that, a lot of counterparties that could take issue with various aspects of it and a lot of established interests at play here.

27:55So I think this is going to be an interesting area to watch. But I do believe prediction markets are the future, and they have societal value across all categories. Were you ready for this? When you launched it, did you know a bunch of states are going to get mad? We might have to geolocate our services or halt them in certain states? Yeah, I mean, well, we launched without Nevada, as you know. So yeah, of course, we built the capabilities of that. as we have in the traditional non-prediction markets business. So, you know, crypto also has a state-by-state component to it. So, for example, in New York, we don't offer crypto transfers.

28:35You can't transfer in and out. There's differences between the coins that are available on a state level. Up until recently, we weren't in all 50 states. So, it's nothing new to us. I mean, there's But were you expecting New Jersey to show up and say, turn this off until we deal with it? I don't know if we were expecting New Jersey in particular, but obviously it's not a surprise that if we're in sort of like, yeah, this new area where states have vested interests to make sure that it's state regulated, that, yeah, that they would have concerns. The argument that you're getting at, the debate that you're getting at is the difference between a prediction market and gambling.

29:18But straightforwardly, that is what is happening here. The states are saying, we regulate gambling in our states. You pay taxes. We have revenue. We want to protect our citizens. This looks an awful lot like gambling. Go ahead and stop. I would offer you the opposite argument or the opposite view. I know a lot of people who believe the markets are gambling, right? That merely investing in the stock market or meme coins or meme stocks is a kind of gambling that has taken place because it has been democratized by apps like Robinhood and even E-Trade before. The difference I see there very clearly, right?

29:51The stock market, you should be able to look at the fundamentals of some company or its earning reports or its after earnings reports press conference at some like an NBA game. And you should be able to derive some secondary value, right? Like, I understand what this company is doing. I understand how much money it's making, how much money it's losing, where it's investing, what its opportunity is. I can draw some line to its future stock capability. And that is the most important thing that sort of undergirds the market, right? That's the argument against the market is gambling. There's some mathematical reality there.

30:22What is that same argument for a prediction market on sports? Because sports doesn't have – you can't go look at the Lakers and say, well, LeBron's there, so they're definitely going to win every game. That's just not how it works. You're making a valid point. I think the line between gaming and gambling and finance is like a debated thing, right? There's people that will go on Twitter and say, anytime you're taking risk, it's a form of gambling. And I think the term is not properly defined and specifically defined, which I think adds to the confusion. And in particular, when you deal with derivatives markets, which I think prediction markets are a subset of the overall derivatives market space, there's several types of market participants.

31:12There's folks that are coming into a market to hedge, right? And, you know, if you're a farmer, you're sensitive to crop yields and rain and weather and all sorts of things. So one of the original use cases was for these derivatives markets to apply to farmers, for them to hedge their exposure so they can kind of smooth out their returns and their risk over time. And actually, for these types of historical reasons, the CFTC and these derivatives markets are overseen by Senate agriculture, which is kind of like a weird historical fact. And now, you know, crypto being in there has a side effect of Senate agriculture overseeing crypto.

31:54But yeah, it's the historical reason of futures and derivatives being especially valuable to farmers. So you have hedging, which is one use case, right? But you also have speculation. Speculation is people just making predictions on what the price is going to be in the future. And without the speculators, it's not an effective market for hedgers. because hedgers can't always, you can't just have people taking the opposite view of what's going on in reality because then it won't be effective hedge. So you need the speculators to be in there speculating in order for the market to be liquid. And then you also have arbitrageurs.

32:30And arbitrageurs, which is how I began my career as a trader, they just look at all markets and using technology compress the prices. And if you have the same thing trading in two different places, you just buy it where it's cheaper. sell it where it's most expensive, and eventually the prices converge. So these are the three types of participants necessary to make any derivatives market work. And so now your question is, if you look at folks that are speculating, is there a difference between speculation and gambling? Let me make that question more specific, just based on your example. My father-in-law is a farmer.

33:09I married a farmer's daughter. The utility of him being able to hedge is very clear. Yes, it's historical. And yes, now the regulatory scheme has this quirk of agriculture overseeing the derivatives market. But we all still got to eat. The farmers have to stay in business. So the utility of that remains exactly the same as it was when these regulations were initially passed. And then you need to do some market making. You need to have the speculators and the people doing arbitrage in order to create the market for the hedging. But the utility of that for the farmer and then downstream of the farmer, us literally filling our plates, is obvious.

33:44What is the utility of that for sports, for the Lakers? Like, are you trying to hedge against the risk of losing for the Los Angeles Lakers? I mean, I'll tell you that sports is a big industry in the U.S. There's lots and lots of different types of businesses that rely on sports and the sports industry economically. And it's gotten much bigger. You know, it's not just like fans, but sports betting, since that's been legalized, has just grown to tens of billions. Do you think that's good? Do you think sports betting is good? Do I think it's good? I mean, my view is people should be allowed to do what they want with their money.

34:29I think that markets are good. Generally, individual accountability is important. And there's folks that trade very, very actively and process lots of information and actually are quite scientific about taking advantage of mispricings. And as a former arbitrageur, I do think that that has value. So I think I want to get away from actually trying to judge every contract on an individual level because I think you can get into trouble. Of course, maybe I can come and give you examples of contracts that I don't think are great and I wouldn't trade personally. But I think prediction markets does have significant societal value.

35:18And I think it should be, it's an evolution of what the newspaper served in the past. You have the front page, which is events that people want information of that are trending right now. And then you have the business section, arts and leisure style. And of course, you have sports. And the newspaper obviously had value. I mean, people were paying for it after the fact, right? Prediction markets actually give you that news faster, in some cases, before it even happens. So I think certainly it has enormous economic value. And I view sports as kind of a subset. It's one of the categories of information and news that people really, really care about.

36:01That's why it's so interesting to people. And people are going to want to protect their purview over that domain. But yeah, I would distinguish prediction markets from gambling in that way. Generally, I mean, I have mixed feelings, obviously, about gambling in general. But prediction markets, I'm a big believer in. When I said I had 900 pages of questions, by the way, that thing you said about information, that's 850 of those pages. So we're going to get into that. But I just want to stay on this for one more second. What specifically, to the user, as expressed in your app, is different from betting on sports versus buying a contract in a prediction market?

36:43because I looked at Robin Hood today and I understand there's some difference and there's some vocabulary differences. But what I saw was I'm looking at March Madness and if I pay 80 cents for a contract and this team wins, I'll get a dollar. And that feels a lot like betting. Yeah, one of the big differences is with traditional sports betting. It was Auburn, by the way. I don't know if they won or not. Yeah, they're the one seed. So traditional sports betting, let's say digital sports betting, not even on-premise stuff, there's a house, which means that when you enter a bet, you're basically betting against the house.

37:25And with that comes all of the negative effects. Like, there's no market. The house is just giving odds. There's a line. They're setting the line. And if you win too much, you get kicked off the platform, which is unfortunate. You also, in most cases, once you're locked in, you can't get out of your bet. So because this is a market, there's no house. Buyers and sellers are meeting directly in an exchange. We're crossing orders, which facilitates price discovery. So since there's no one setting the line, the market sets the line. it becomes a more effective prediction. And from the user standpoint, the spread gets tighter for a variety of reasons.

38:11Price discovery leads to tightening of spreads. So I think that's the major thing. There's no house. Buyers and sellers meet. You can get out of a position during a game, which at betting platforms is not a commonly offered feature. So it's very similar. You get all the benefits and the power and the rigor of financial markets. But just to the base level, some 20-year-old kid downloads this app and they want to wager on March Madness. The technical implementation of put in some money and get some money out if the team you've predicted to win wins is different. And I think the regulatory approach you're taking is different, right?

38:54You're saying these are effectively derivatives contracts and you should be regulated differently because it's not traditional gambling. But the effect on the user is the same, right? The reason we regulate gambling is because it has bad collective effects in society. People can get addicted to it. They throw their savings away. There's a lot of reasons outside of the technical implementation of the house that's aligned and can move against you. There's reasons that we regulate it. Do you think those reasons are applicable to what you're doing with derivatives contracts is I look at it from the user pushing a button and the button says, if they win, you get money.

39:28The technical implementation of that doesn't really matter. I think some of those reasons are applicable. A lot of the origins of the state-by-state regulations come from a world where you actually had like physical places where you would go, right? And so these turning into digital platforms in and of itself, not even CFTC, but also state-regulated gambling, those are new things. So I think the regulations have to evolve either way. But yeah, certainly we want to make sure that suitability and all of those checks are followed through. And I think actually the traditional financial markets, futures markets are highly regulated.

40:15You do KYC. You do monitoring and surveillance. There are suitability checks that make sure people really know what they're getting into and they have to self-certify. And I think that's a benefit for prediction markets being in the CFTC regime because you have high standards. I mean, saying that these are financial markets isn't, in my opinion, a lowering of standards in any way. I think it's a heightening of standards. Well, the standards don't exist yet. I think that's right as applied to this specific thing. The standards exist abstractly for derivatives markets. And now we have to apply them to this behavior.

40:55And at least some states are saying, actually, this just looks like gambling to us. Yeah, but what I'm saying is like CFTC regulated markets are highly regulated. It's yeah, I don't think. Yeah, it's not accurate to say that there are no standards because following the CFTC standards, which are very rigorous. One of the things I worry about with our audience, we have a lot of young men who listen to the show, who read The Verge, is a sense that these types of markets, whether it's crypto, whether it's the regular stock market, whether it's derivatives, whether it's prediction markets, whatever it is, whether it's just FanDuel, is a quicker path to riches than regular work.

41:36Is that how you want people to perceive Robinhood, that this is the future of the American dream? I did write an article back in, I think it was 2021, about how the American dream itself as a concept has evolved. It used to be very tied to homeownership, right? You'd buy a house, you'd get a 30-year fixed mortgage, and that was kind of the American dream. and that that's actually not ideal from an investment standpoint. Like the amount of interest and fees you're paying on that, if you view it from an investment standpoint, is actually incredibly high. And if you're going into U.S. equities, which are now commission-free, very, very low cost, that the American dream should perhaps evolve towards U.S.

42:26equities. I didn't make the claim that it should be crypto and derivatives or all of these things. And in fact, a couple of days ago, we actually crossed the bridge from being sort of a purely self-directed platform into offering investment advice with Robinhood Strategies. And if you look at kind of the asset allocations of the portfolios there, it's very much like listed equities in ETFs. And then if you actually look at what we incentivize as a business, what we're giving matches for, it's things like retirement, where you get a 3 % match on contributions. So I think I would distinguish between what the right way to invest is for the bulk of your money, which I do think for most people that have income and assets should be passively managed.

43:23But also, I do think people that have the income and can passively manage a portion of it, I don't think it should all be passively managed. I think there is a room in your portfolio for every person for it to be actively managed. And that could be in things that you have high conviction in, whether it's individual stocks, cryptocurrencies, options. If you're at a startup, you implicitly have high conviction and lots of concentration in the company that you're actually working. And if you consider yourself an expert in an industry or even sports, I think the derivatives markets live kind of in that bucket.

44:04But yeah, I wouldn't say, yeah, if you look at Robinhood, the actual mission and the future vision is for us to manage every dollar. And I don't think every dollar should be in derivatives markets, probably a small portion of them. But the reality is people bet on sports, people engage in derivatives trading, and that's money that's leaving Robinhood accounts. So if we can serve all of those dollars with our platform in a seamless and easy way at the lowest possible cost and the best user experience, then we'll have full wallet share with our customers across multiple generations. And I think we could both add value and build a significant and important company that way.

44:52We need to take another quick break. We'll be right back.

45:06We're back with Robinhood CEO Vlad Tenet. Before the break, I was pushing him on the distinction between sports betting and prediction markets, and whether he sees what Robinhood offers to its users, many of whom are young men, is a different kind of American dream oriented around taking risks to make money. But I also wanted to dig into that risk component a little deeper as it relates to prediction markets. I wanted to explore the kinds of information these markets are supposed to provide us, where it actually comes from, and what happens when you apply the same incentives that come around gambling on sports to things like presidential elections.

45:39Let me ask you about information and risk, right? What you're describing is a spectrum of risk, right? You've got your new bank. You're paying people about a 4.5 % yield. That's low risk, right? That's just your bank. And all the way on the other hand, you've got prediction markets for sports, which are maybe the most risky thing you can do. And then in the middle, you've got your thesis about information, right? Prediction markets are this new source of information. The thing that gets me is when you make prediction markets, the value of the information skyrocketed. rockets. And then you have a lot of incentive.

46:10You've created an enormous incentive to affect the outcome. So in the best case, you work at a startup. You've got stock in the startup. You have a huge incentive to affect the outcome positively. The company will be a success. You're going to work really hard. You're going to make a lot of money. I look at the NFL, for example. I'm a big NFL fan. The amount of time we now spend talking about referees in the NFL and officiating because of gambling has gone up. The notion that the league is scripted and that the games are rigged because any individual referee can make one penalty call at the end of the game and shift the outcome is skyrocketed because of the inclusion of gambling by the NFL into the product itself.

46:48That feels like a bad outcome, right? To create all of these incentives to shift the outcome without any regard for the quality of the outcome itself. How do you manage the prediction markets against that incentive? Because I see that as totally distorting and in most cases negative. I think that's a great question. And I think that's one of the areas where the traditional financial system already has lots and lots of infrastructure because we've faced this problem for decades. Right. Like you have insider trading rules and regulations, and it's very analogous to a company insider using proprietary information for their own benefit to make money in financial markets like that very much exists.

47:36There's also anti-fraud, general anti-fraud protections that go into place when you're not dealing with securities. So if you remember, Coinbase had a case a couple of years ago that was actually a DOJ coming in. And what they found was that some employees used knowledge of forthcoming listings of, I think it was some meme coins, bought those meme coins because they knew that they were going to be listed and made a bunch of money. And of course, this was caught and tracked by surveillance and they got in a lot of trouble. So I think generally the same principles apply. Sure, but how does that track with your sense that this is the new source of information?

48:23Because the information only enters the market if people have it and they begin trading on it. So if you want to outlaw insider information, you have to prevent people who have that information from trading on it. So how does that get into the prediction market? Yeah, I mean, basically, individuals who have proprietary information shouldn't participate in the prediction markets. And, you know, all of the DCMs basically have rules against this. And because we know who's making the trades, right? I mean, everyone has to be KYC'd at, you know, DCM, FCM, regulated prediction markets. We have the capabilities of identifying abuse.

49:05And of course, all of these rules can evolve over time. So if there's new vectors for abuse as the markets expand, there's mechanisms for those to be incorporated and to become new rulemaking. And, you know, hopefully the rules should evolve as with any system. And if there's like new vectors coming in, then we can evolve the rules to account for those. But I'm actually not sure if there are new vectors that aren't accounted for by the existing rules. And I think this is one of those things where because the state regulatory regimes haven't really accounted for this, they may be less well-positioned to oversee abuse than the federal level.

49:54Where does the information come from then? If I'm looking at a prediction market on Robinhood and the line moves sharply, that's the information you're talking about. This is a new source of information. You're going to get it before the news gets it or the traditional media gets it. You're going to watch that line move and you know something happened before everyone else knows it happened. How do you get from that second order effect, the line moved, people started moving their money against some new information, to the information itself? In the same way it happens in financial markets, right?

50:24You have sophisticated participants. some of them are retail, many are institutional, that actually make sense of all of the data that's coming in in real time and actually crunch the numbers and see what it means. And a lot of this is happening using automated computing methods. They're crunching all of the data. But yeah, you can think of it as, let's say you're watching the news on election night and you're getting all of this polling data and all the early returns from the polls and, you know, they're telling you Ohio results just came in and, you know, there's this many voters in Ohio out of this many that are reported.

51:05I mean, there's a process by which you take that and actually price what the likely outcome of the election is. And so the people that are really good and fast at doing that have an opportunity for profit. That opportunity for profit isn't the information itself, though. That's what I'm getting at. I've heard you say the information line before. You said it to my friends Casey and Kevin on Hard Fork. You said you're going to get information before it happens. Prediction markets are not the future of trading, but also information. What prediction markets are is the news faster. But here you're saying prediction markets are reacting to the news, right?

51:40They're reacting to information. So if you're a regular Robinhood investor and you're looking at the line move, how do you get back to, okay, the smart money made some decisions. The smart money is watching Harry Anton say on CNN, here are where the votes are, and now I'm repricing the contract. That's not the news, right? That's a derivative of the news. Yeah. I mean, I guess this is also an area where there's ambiguity in what we're saying. I think traditionally what I would say the news about the election is when the news networks call. Like election news is probably when, you know, CNN and MSNBC, NBC and all those networks say, okay, you know, Donald Trump's the winner of the election.

52:24So that happened the next day in the vast majority of cases. So the news of who won the election hit next day. But the prediction markets priced Trump at 95.5 within a few hours of the polls opening, right? Right. So I would call that knowing the news before it happened. I mean, if you were paying attention to the prediction markets, you knew what the outcome of the election was, you know, and within some band of error. But I'd say 95.5 is pretty good. Right. Right. The difference for the media outlets is they can't be wrong or at least when they're wrong, there are consequences for them being wrong.

53:06They lose their credibility or they have to issue retractions or Trump sends them all to El Salvador or whatever he wants to do. There's not a consequence if you trust the prediction market and it gets it wrong. The consequence is you lose money. How do you think about that accountability? Well, I think that the accountability is only part of the story. I think the other part is that there's an incentive to keep viewers glued and entertained, and you want them to watch for longer. So you don't want to just be like, oh, the election's over. Everyone can go back to what they're doing. They have an incentive to actually prolong it and say, hey, it's still anyone's game.

53:51Anything can happen. Keep watching. right? It's the same thing for sporting events, actually. I remember I was watching the Jake Paul-Mike Tyson fight. That wasn't available in US-based prediction markets, but I opened up Polymarket to just view what was going on, right? I think by the second round, the prediction markets had it quite clear. It was like 90-10 Jake Paul. But if you listen to the announcers, It was like, oh, you know, all Mike needs is just one punch or he just needs to hold out a little bit longer. You didn't know the outcome of that fight before it started? I knew the outcome of that fight before it started.

54:29And I know why lots and lots of people were betting on it, but on Paul and they knew why the fight was stretched out the way it was, right? I mean, like, that's the danger. What you are describing is the danger. Here's this totally synthetic event that we're going to make people pay for and then have people bet on. And then everyone will believe at the end that it was rigged. And the answers have nothing to do with it, right? It's the distorting factor of the gambling that occurred around it that made everyone think, oh, this is totally rigged. Right? Like both Mike Tyson and Jake Paul got a lot of money for participating in this thing that most people believe was a sham.

55:07And they had a lot of incentive for the outcome to be make it a little bit longer. Right? Make it feel like this isn't totally a joke. And everyone knows that that's what happened. Or at least they perceive that they know. And that's the distortion that I worry about. I don't have any details about that. But my point really was, I think to your question, I don't think the only incentive is for the media to get it right. I think the incentive is actually to have people watching longer, which sometimes conflicts with giving you the information as quickly as possible. So, I mean, I think you have to agree that that's the incentive, right?

55:48I mean, I think platonically, yes, like the media is held to a very high standard. You have to get it right. And we'd like to think that everyone is working with that in mind. But there's also a strong incentive to maximize viewership, to maximize time spent versus other networks. Because if you don't do that as a media enterprise, eventually you're drained of resources and you die. And I think sometimes that incentive actually can contradict with getting you the absolute truthful information as quickly as possible. Yeah. I mean, I work in the media. I would say there's an equal incentive to be first.

56:26And that is equally damaging. is somebody who runs this race every day. That's equally distorting. But then on the flip side, I would say it's also not working, right? The media is losing jobs and it is dying and it is falling in relevance. And there's a lot of reasons for that that I don't think have anything to do with stretching out the information. But what I just keep coming back to is the incentive to change the outcome by allowing people to have a financial stake in it seems very, very distorting. And there might be some rules against it. There might be some rules in – like the NFL does injury reports because getting access to injury report early was helping gamblers, and the NFL wanted to tamp down on that.

57:08And that's the history of the injury report. I get it. We're doing transparency. We're doing regulation around this stuff to try to control it. But here it seems like the regulatory regime is new where you're trying to fit a behavior into a regulatory regime that wasn't built for it from the start. And you've got a lot of young people taking part in this behavior who believe now that everything is rigged, right? That the world is a casino of this kind. And that seems – this is what I was going to ask about. That's where you have to make the turn from startup founder with a disruptive idea to I am the CEO of a bank, right?

57:42Like the responsibility rests with you. And I'm wondering how you're shouldering that burden. Yeah. Because once you have the bank accounts and you can move it into the highest risk category, that's a big deal. I think that is a criticism for sure. I think in sort of a more precise form, it's basically like, do you want your betting in the same app as your bank account? Can these things coexist under the same platform? I don't think that it's the highest order criticism because if you think about it, all these things are on your phone, right? And so it's like fairly straightforward. And now, you know, everything can link to your bank account anyway.

58:28You know, if you had a DraftKings, you could link your DraftKings to your bank account pretty easily and move money back and forth. So we kind of get into this like, well, but should they be separate apps? Should they be separate brands? Do we want the same thing? But I mean, the reality of it is everything's on your phone. It's all your phone. It's pretty easy to just like go to the home screen, tap a button and go from one service to the other. So yeah, I actually don't think that that criticism is higher order. Like basically it's just a completely meaningless decision. It's a business decision.

59:06It's sort of like, where do customers want it most? Because if they want it in the same app, functionally, there's no difference between it being in the same app and being in a completely different brand elsewhere on your phone. Because the difference between going from one to the other is like three seconds instead of two. There have been some good reasons in the past to separate these at the corporate level, right? And I hear you that it's pretty easy to just move money into FanDuel. But there was the Great Depression, and then we did Glass-Steagall, and we said the investments and the banks have to be farther apart.

59:40Then we allowed them to get closer together, and we had the 2008 financial crisis, and then we moved them slightly farther apart. And now you're saying, look, because of phones, this distinction is meaningless. But history suggests that bad things kind of happen when you let investments and banking get closer together. Well, but that's for safety and soundness reasons, right? You don't want the same organization to be over-levered and to take proprietary risk with their capital when they're also supposed to be safeguarding that capital. But we're not taking proprietary risk because we're just a broker routing orders to a marketplace where buyers and sellers interact.

1:00:20So the safety and soundness concerns that you'd want to separate proprietary trading from retail banking don't apply in this case. Don't the concerns apply to the individual consumer, though, who is less sophisticated than banks who often get themselves in trouble? Well, I mean, again, that's the point of the individual has money. They have a bank account. They're moving things to different accounts. So it's the same thing from their perspective. It doesn't affect them whether those accounts are at different entities or one, barring safety and soundness concerns that are entity concentration, which don't apply in this case.

1:00:59Would you accept a regulation that said when you open the Robinhood banking app that you were prohibited from advertising or marketing the derivatives products and the Robinhood app themselves? Possibly. Yeah. I mean, I haven't thought about that. I don't think we should accept new regulations lightly in any sense, but I'm certainly a believer in regulation. I mean, I run many highly regulated businesses. um so yeah i don't want to just be glib about it and say oh that that sounds like a good one you'd have to you'd have to look at the pros versus the cons deeply i i generally think that we get into trouble by having lots of regulations we don't have mechanisms to remove them so so kind of like once it's added they just you just keep building this like giant, thick underbrush of regulations and nobody ever wants to remove them.

1:01:55And then, you know, now we're in a situation where as a country, we're looking around and saying, how do we get here? We can't do anything anymore. You can't build a bridge. You can't, you know, trade crypto. And I think that's a problem. So I think I generally agree with some variant of for every one you add, you should probably remove one. So things change and the regulations to large part don't make sense. I mean, I'll give you another example. Accredited investor. So this is probably one that maybe you'd agree with even because it's less controversial. But accredited investor rules basically stipulate that you can't be investing in OpenAI or SpaceX unless you're accredited because some variant of they're too risky.

1:02:47And why are they too risky? Back in the day when these regulations were created, it was hard to get information. There were no prediction markets. There wasn't the internet. So, I mean, there was a lot of murkiness and maybe the wealthy folks had access to information and enhanced due diligence. Normal people didn't. So we have accredited investor rules. Now we're in a situation where meme coins are fine. You can put all of your money, anything you want, in meme coins, sports betting, whatever have you. But OpenAI or SpaceX, companies like that are too risky. So I think those cannot stand. And as you can probably tell from our conversation, I don't think we should ban trading and meme coins and sports betting.

1:03:34People should generally be allowed to do what they want with their money. And so I think the accredited investor rules need a complete reboot and probably something closer to self-certification and some requirements for brokers and platforms like ourselves to put these things into buckets based on how much disclosure they have. You know, maybe if you're an early stage startup and there's no disclosure, we have to put a skull and crossbones in red and tell you this is an incredibly risky thing. You could lose 100 % of your money. But yeah, I think the status quo needs a serious reboot. I just had the idea of Sam Altman doing a meme coin to fund Opening Eyes expansion.

1:04:16It seems more likely than not. Let me ask you about crypto just to wrap up here. I have another 850 pages of questions about crypto for sure. Let's do it. Why should anybody sell a Bitcoin? My general philosophy for myself is I've only ever had regrets selling investments. So pretty much, I think like I tell people all the time, when I was in college, I bought Nvidia stock and I thought Nvidia was a great company. They made amazing GPUs for playing computer games. Doom 3 at the time was my favorite computer game. And so I bought it for that reason. And I think I got it at 20 and sold it at 30.

1:05:02And I felt really, really good about myself. So I think everyone has those stories of something like that where they exited a little bit early. So I think people should sell. I mean, my own philosophy, I'll sell if I have to. but generally speaking, I'm more of a accumulator. I like to accumulate things and hold onto them for a very, very long time. But people have different needs. Sometimes you need to buy something, you have an expense, and you don't have that luxury. So in that case, the fact that these markets are liquid and you can sell and get a good price is very, very important. And imagine you're someone who bought Bitcoin in 2011, when you got it at, what was it,$1 or$2 a coin.

1:05:50Yeah, I think it's not unreasonable for someone like that to sell at some point along the way. I ask that question because my thesis is people only care about Bitcoin because of dollars. It's the value of Bitcoin as expressed in dollars. It makes everybody care about it. And if there's no reason to get rid of one unless you need the money in dollars, then you will never transact in Bitcoin. It will never stabilize to the point where buying an NVIDIA GPU in Bitcoin is a better idea than buying it in dollars. And if you can't get there, then we really do just have a store of value. We just have another thing.

1:06:22We have digital gold. And you run the platform. And I'm wondering if that's your view as well. Yeah, I think the properties of Bitcoin right now are much more conducive to it being a store of value than an actual mechanism for transacting and buying things. I think the fees are really high. And it's very, very easy, including using platforms like Robinhood to take your crypto or any other asset and convert them back to dollars for when you need to transact. But I don't think that's unique to Bitcoin. I think stocks can essentially be thought of as a store of value from the retail investor standpoint.

1:07:03Nobody's sending little bits of stock between each other to pay for things. But when you buy a stock, you have a thing, You own some insignificant part of a company. You have voting rights. You could fire the CEO maybe. There's a tangible value to owning the stock besides the stock itself. Yeah, yeah, I do. Yeah, but what I'm saying is I don't think that it not being used for payments really puts a ceiling on its value. I think that actually it being a medium, I think the medium of exchange use case is becoming less and less important over time. Pretty much anything can be a medium of exchange.

1:07:43I mean, imagine if everyone had Robinhood accounts. Basically, if you wanted to pay someone, you'd only need to convert it to dollars at the moment of paying them. And then the recipient can convert it into an asset that appreciates more. and you would obviously have probably a small portion of your portfolio in actual dollars. So I think medium of exchange was more important when fungibility was much more difficult like it was back in the day. But now fungibility has never been easier. And so the store value use case probably dominates. It's weird that I have one vision of the economy that's like everything's a casino and another one that where everything is Disney bucks.

1:08:24And I don't know how to reconcile those two things. Well, Disney owns ESPN. So there you go. We'll all be gambling in Disney bucks. It's going to be great on ESPN bet. In order to keep the value of Bitcoin or any of these store value coins high, right? You need a constant buyer. Do you think that Trump crypto reserve is a good idea? Because that's the purpose it seems to be serving. Well, I'm not sure. And I of think of this i mean we we get the question uh ourselves about should you know robin hood uh as a entity have some of its balance sheet in bitcoin you know every other company is doing that why aren't we doing it and again i come back to we only follow the crowd when they're right so you know we obviously haven't jumped into crypto on the balance sheet yet i think part of the reason why is it's not critical to our purpose as an organization.

1:09:21I mean, of course, if we incidentally had some crypto as part of serving our customers with various activities, we can and do do that. But we also don't want to become some vehicle for people that just want exposure to Bitcoin to buy our company. And I think generally speaking with the U.S. government, I think you can make the argument that the U.S. spends money on a lot of things that are worse than Bitcoin. And I think that's true. I mean, there's just blatant waste out there. Boy, do I disagree with you on that. Also, buying Bitcoin is not a service, right? I mean, the government mostly spends on services for the citizens.

1:10:03Do you think the reserve as announced is the right mix of holdings? I've heard it called a shitcoin reserve because it has Solana in it, right? Like, you trade on all these coins, the platform enables all these coins. Is it the right mix of holdings in the Trump reserve? I think, I think that generally what they announced was not selling, uh, the coins that they sort of like seize through various mechanisms. I think that's fine. That that's probably the most I would have done if, if this decision was, was up to me. And I think there's reasonable, reasonable arguments to be made for that. I mean, And like selling something is also a conscious, affirmative decision.

1:10:44You're moving a market. You're doing something by selling it. And, you know, again, my personal philosophy, I've only had regrets when I've sold stuff. So I actually think what they outlined was reasonable. Now, you know, depends on the details of what budget neutral acquisition of Bitcoin could be. I think that's a fairly high bar for it to be budget neutral. So I think we'll see. But yeah, probably, I think it's reasonable. It's a sensible approach. I don't know if it was my decision. I don't know if I would have gone further. Probably not. Part of your new banking service is that you can get physical cash delivered on demand to your doorstop because you don't have locations, obviously.

1:11:30How on earth does that work? Are you mailing cash to people? No, we are using on-demand delivery logistics. So we haven't announced our partnerships yet, but we're not actually doing everything ourselves. Yeah, it's basically combining the power of on-demand delivery logistics with financial services to bring the retail bank to you. So if you look at digital banking before Robinhood, there was always a sacrifice, right? You had a nice convenience of the digital app, but there were no branches. And so if you wanted to get cash or even deposit cash, but most likely withdraw, you'd have to go to a 7-Eleven or a CVS or something.

1:12:15And nothing against going to 7-Eleven. I love 7-Eleven, but it's not quite the private banking experience. In fact, private banking experience. I was a FRB client, First Republic Bank, and they had this amazing feature where they would deliver cash to you. So it is a high net worth feature. But of course, it would be slow. It would be super expensive. It would be for a lot of cash, and it would come in an armored vehicle. So we asked ourselves, how can we kind of make that experience for everyone? And this is what we came up with. So I think we're excited to roll it out. Are you going to roll up an armored truck to people's houses?

1:12:55Probably not for a small amount. But if you think about it now. Like an armored mini. So, I mean, people already get iPhones delivered, right? And an iPhone's an expensive item, you know,$1 ,000 give or take. Small, expensive item, high ticket charge. My estimate is average ticket charge for a cash delivery order offered by Robinhood's probably going to be in the low hundreds of dollars. So similar dollar value to a delivery order, maybe a little bit higher, but probably not quite as high as delivering Apple products. So I think if you wanted to get a quarter million dollars delivered, you need an armored truck.

1:13:38And we'd like to facilitate that as well. But for your typical ATM-like transaction, the idea is that that would be a smaller amount. It would get delivered to your house. And we'd like to figure out how to do it outside of your house, too, if you're out at a place that's in a service area. But that's a little bit more complicated. But yeah, if it could come to you in 10 or 15 minutes at low cost, I think there's real value there. 16 % of payments in the U.S. are still cash payments. So even though we'd all like cash to go away, cash is still very much a giant part of the economy here. Yeah. Well, I think you can tell.

1:14:19I could talk to you for hours and hours about a wide variety of things. We're going to have to have you back just to talk about the logistics of locating cash around farmers markets throughout the country. Because that's very exciting for me. Vlad, this has been great. Thank you so much for being on Decoder. Thanks. Thanks so much. Thanks for the time.

1:14:37I'd like to thank Vlad for taking the time to speak with me and thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else at all, drop us a line. You can email us at decoder at theverge.com. really do read all the emails. You can also hit me up directly on Threads or Blue Sky, and we have a TikTok and an Instagram. Check them out. They're at Dakotarpod. They're a lot of fun. If you like Dakotar, please share it with your friends and subscribe every year to podcasts. Dakotar is a production of The Virgin, part of the Box Media Podcast Network.

1:15:01Our producers are Kate Cox and Nick Statt. Our editor is Ursa Wright. The Dakotar music is by Breakmaster Cylinder. We'll see you next time.

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