Prediction Market Warning.

Coffeezilla is lashing out at the

prediction markets, calling them

gambling and legalized insider trading.

>> Prediction markets are not just

gambling. There's also a lot of insider

trading, too.

>> And expectedly, the brokers of these

companies and employees of these

companies are doing everything in their

power to tell you, "No, we are not

gambling companies."

>> Qualitatively different than sports

gambling. In fact, you literally have

people who work for companies like Khi

putting together tweet responses. Look

at this. Elections predictions guy uh

since 2019. Calshi users since 2024.

He's got the little Kelshi logo in his

username. Debunking Coffeezilla's

prediction market claims. It's not

insider trading. It's just a reveal of

information. We're trying to help reduce

information asymmetry. Whatever. At the

same time, you have people like Vlad

Tenev over at Robin Hood cringing at the

idea that, oh no, they're calling us

gambling websites.

Why? What is going on here? And why are

these executives recoiling at the

thought of being labeled gambling

companies?

>> Yeah. Cuz because then at that point,

when do you turn from investing just to

straight up gambling? It's a dull

>> at that point.

>> Yeah.

>> Yeah. I I think that well in this video

as usual I'm going to share perspective

that nobody else attends to share. So

let's get into not just why these

companies are so tripling down on

predictions not on gambling

and what the regulation around all of

this actually is. Spoiler alert Trump

got rid of most of it. So first what's

motivating these companies? Okay, the

first thing that's motivating companies

like Robin Hood, is of course money.

It's the same reason Donald Trump is

getting into truth predict, which is

sort of like prediction markets via

Truth Social. It's because of money.

Look at the financial statement that

Robin Hood just released for the quarter

ending September 30th. What you're going

to find is that other revenues, which is

where we see prediction market revenues,

have increased almost 4x from $19

million to $72 million. In fact, they

say it right here. In addition, other

transaction-based revenues increased by

$53 million quarter, you know,

year-over-year, right? Primarily driven

by increased user activities in

prediction markets. Ah, got it. So, the

betting markets are leading to a 4x

increase in revenues for Robin Hood,

huh? Well, how are the other portions of

their business growing? Oh, well,

spoiler alert, I already wrote it down

for you. Crypto is up almost 2x. In

fact, we can see right here

cryptocurrencies quarter year-over-year

increased about 92%. However, if you

look on a 9-month basis, it's only up

about 45%. But let's just give crypto

the benefit of the doubt and say that

their revenues year-over-year, which

they are up almost double. Okay. Then

you have equities revenue.

While equities trading was up 78%,

their net revenue was only up about 50%

because their rebates that they're

getting from market makers and exchanges

shrunk. I'll explain all that in just a

moment. And options grew 27%. So, I want

you just to look at this cheat sheet

right here. These are the growth

verticals for a company like Robin Hood.

4x up on prediction markets. Crypto's up

2x. Stock revenues are only up 50%.

Options are only up 27%.

Now, why would that matter? Well, it

matters because where there is the most

growth is also where you have the

largest spreads. Ah, spreads a little

complicated. I'll keep it very simple.

The easiest way to keep this simple for

you and then I'll prove it to you is to

understand this. When you buy a stock on

Robin Hood, if you buy a $100 worth of

stock on Robin Hood, Robin Hood might

make about 10 cents. This is just

roughly based on the total spreads that

are available. So, frankly, some of this

is going to be shared with market

makers. So, let's just say Robin Hood

and the market makers will make 10 cents

or a dollar or $2 depending on, you

know, what we're trading, right? and

then they're going to split or share

some of that. So you go spend $100 on a

stock, maybe Robin Hood and the market

makers make 10 cents. You go spend $100

on an option, well Robin Hood and the

market makers might make about a dollar,

which is really good. That's 1%, right?

And if you spend it on prediction

markets, they make about $2. So you can

see a user that goes in and just buys a

stock makes Robin Hood and the market

makers about 20 times less money than

the prediction markets. This makes

intuitive sense because if you think

about it, what do you think people do

more? Bet on Google search results which

are just going to be rigged by insiders

at Google anyway. Spoiler alert, that's

exactly what's happening. or you know

what a sports bet is going to be at the

end of the year or like which team's

going to lead or you go into hey you

know I'm going to guess what the S&P 500

is going to be by the end of the year.

What do you think is more of a used

market? Those things I just described or

Apple stock. Obviously there's a whole

lot more activity at Apple stock and

that's why there's less money to be

made. Here's how to look at this. When

you look at some of these prediction

markets like this on Robin Hood, you

could see I can bet yes 27 cents the S&P

500 will close within a particular

range. So I could bet I'm sorry 29 cents

on a yes or I could bet 73 cents on no.

But if I add that together, I get 102.

Why does it not add up to 100? Because

that's the spread. That's where the

market makers were making money. And

sometimes that goes all the way up to

about 103, maybe even sometimes 105.

There's a lot of money to be made there.

Go to Apple stock for a moment. If I go

to options, and I'll just pick a quick

option here, like a 280 call on Robin

Hood, I can see the spread here is about

1%.

So, I've got a 2% spread on the

prediction markets. I got about a 1%

spread over here on Apple stock options.

Well, what if I just go to buy the

actual stock? Let's put one share in.

Let's throw in a limit order here. Go to

the question mark. Ah, look. They

actually give us transparent data of

what the last sale is and what the

actual spread is, the bid ask spread.

Now, the way this works is the

middlemen, the market makers, they go in

there and they make sure your trades

fulfill instantaneously. That's the

magic of why when you swipe up, you get

the little confetti. It's like, yay,

your order is confilled. is is filled.

You think Robin Hood is instantaneously

when you say, "I want to sell 27 shares

of Apple." instantaneously turning

around and saying, "Hey, uh, who over

here wants 27 shares of Apple," and then

finding somebody to pair that with? No,

forget that. That's way too complicated.

How about this? Hey, Kenny G, I got

another guy who threw in a market order

to sell 27 shares of Apple. You want to

buy them? Yeah, yeah, yeah. Give him

that that uh, you know, that lower price

we have on the spreads there. Okay. Your

order gets filled instantaneously. Kenny

G has those Apple shares, then turns

around and sells them for that higher

price on that range. The ask, right? Bid

ask a and they collect the difference.

But as a thank you, because nobody's

actually trying to give these shares to

Kenny G. As a thank you, Kenny G at

Citadel is going to give some kickback

to Robin Hood. Now, how do I know that

Kenny G is involved? Well, because

that's also on Robin Hood's financials.

Oh, wow. Look at this. We derive

transaction-based revenues from

individual market makers and exchanges.

In fact, 54%

of their total, look at this, as a

percentage of total revenue, 54%

of these transaction based revenues came

from market makers and exchanges.

The biggest slice of that pie was

Citadel Securities coming in at 13%.

So yeah, a lot of money is being made by

Robin Hood and a lot of it is coming

from market makers and market makers

love spreads. And that's why even though

we trade so many more stocks in volume

on Robin Hood, it's why the most

profitable aspect of the business is

options and crypto. Because options and

crypto have wider spreads. There are

fewer people trading random specific

options and random specific

cryptocurrencies. That creates wider

spreads, which means Robin Hood can

collect more money. Look at that. Of

transaction-based revenues, you have 41%

coming from options. 36% coming from

crypto. Only 11% of their money is

coming from people trading stocks. And

remember, where is the growth, folks?

It's not in options. options were only

growing at 27%.

So, if you're Robin Hood, if you're

Vlad, what do you want? You want to be

where the biggest growth is and where

the biggest spreads are. Okay. Well, we

just learned where the biggest spreads

are. We saw it right here. Oh, that's my

iPhone. I saw it. Let me jump on over to

the iPad, which I thought was plugged

in. My bad. Maybe Kevin should install a

switch between the two, but that's okay.

I'll just uh brush my hair a little bit

here. maybe ask you to subscribe or

check out the programs over at

mekevin.com or my real estate AI

company. We're closing our fund raise at

the end of the month there. Not a

solicitation. Read the offering

circular. We are closing the fund raise

at the end of the month. That's at

househack.com or reinvest. It's the same

company. But anyway, look at this. We

know that the biggest spreads are in

prediction markets and that also happens

to be where all the growth is. It's

certainly not on stocks where we're only

growing 50% or options. There's more

spread there, but it's not growing. So,

in other words, we're not getting new

users. I mean, we are 27% is still

decent growth, but it's nowhere near a

moon like a 4x, right? So, you're just

not getting as much growth in options as

you used to. You did during 2021, but

now everybody wants prediction markets.

So, why is Donald Trump getting into

prediction markets? Because of the

money. Now, what's also really unique

about prediction markets is let's say we

had $100 to spend on prediction markets

versus $100 to spend on stocks. Okay?

Well, maybe you've got 2,000 stocks to

pick from. But if you make a stock bet,

there's something called churn. How

often are you going to turn around and

sell that stock? You know, if you think

Apple's going to go up over the next 10

years, you're going to buy it and you're

going to hodddle it. Okay? Well, you

buying and holding does no good. But if

you take that same bucket of money you

had available for trading and you threw

it into prediction markets and there was

something new to predict on that expired

every 3 or 4 weeks like what's going to

happen at the end of this month, what

about the end of next month? What about

the end of next month? What about the

end of next month? You constantly have

this turnover of new dates and catalysts

to trade off of. You can not only get

more spreads because you're spreading

that pie to more things rather than just

a basket of stocks. You're spreading it

to basically any event possible.

Eventually, we can gamble on everything.

>> The long-term vision is to financialize

everything and create a tradable asset

out of any difference in opinion,

>> which is exactly what they say they

want, but you're also taking more

spreads and you're doing it more often.

You're getting a catalyst. You're

getting a forced trade and an expiration

of these betting markets. The football

game is over, the soccer game is over,

whatever. These things happen much more

frequently than actual big catalyst

changes at stocks or downstream options.

So, as a broker, it totally makes sense

why the brokers are all over these

prediction markets. And it's exactly why

they don't want you to call them

gambling because they don't want to get

shut down. Now, Coffeezilla makes a

point that the gambling companies are

like, "This is bull crap. Nobody's

showing up to horse bed anymore at our

casinos and buy our, you know, get our

free drinks and pay our spreads because

they're all doing it from the comfort of

their own home on Poly Market or Cali or

whatever or Robin Hood, which mind you,

Robin Hood's really smart. Robin Hood's

taking the spread, but they're not

actually doing the prediction markets.

Robin Hood partners with other

companies. So if Robin Hood one day has

to wash their hands of these gambling

plays, they can. Robin Hood is just a

broker. Kali does the sports for them

and Forecast X does the elections for

them. So this is how Robin Hood is

actually getting into the highest

growth, highest profit financial

brokering business while offloading the

risk onto companies like Calcia and

ForexX forecast which even though Robin

Hood is selling for a really expensive

premium right now, you kind of have to

look and go, "Huh, could some of that

premium be justified under a Trump

administ administration when we don't

actually think there's going to be much

regulation against anything Trump is

getting into. We know Trump is getting

into crypto and now we know he's getting

into prediction markets. So, do we

actually think the regulars are going to

show up and beat on Robin Hood anytime

soon? If they did, Robin Hood could just

point to these other companies. Oh, it

wasn't us. It was them. We were just

doing the derivative portion.

But it's probably not going to happen

anyway because Trump's getting involved

himself just like he did with crypto.

This is interesting to know. But first,

let me make this here argument. This

page that I'm showing you right now,

this is on our stock tab inside the Meet

Kevin alpha report. And I was able to

pull this up with a click of a button.

After their last earnings, we did an

analysis on Robin Hood. And all I did

was click on Robin Hood. You can get

this in the Meet Kevin app if you're a

course member at meetke.com. Uh, and I

could see that the PEG ratio for Robin

Hood right now is actually decently

expensive at about 5.7. And if we look

at what I wrote here to my course

members, I wrote that Wall Street

estimates just 6.25% earnings per share

growth over the next four years. I

actually wrote that I said this seems

remarkably low and possibly an error. I

actually think absent a labor recession,

Robin Hood's probably going to grow much

more in part because of these prediction

markets. They've also done half a

billion dollars in stock buybacks over

the last 6 months. This is actually very

impressive. On top of that, they paid

$175 million to acquire a registered

investment advisor, and it's a brilliant

way to expand into registered investment

advice, which is basically what

Wealthfront just IPO'ed on. Their robo

advisor service makes so much freaking

money at Wealthfront that Robin Hood is

also doing that. So, like this is a

great company and I think their company

is going to keep growing and they're

kind of a brilliant way to make money in

my opinion off the prediction markets

without actually playing the prediction

markets or taking the risk of the

prediction markets. Now, I want to be

clear. I don't have longs or short or

any exposure to Robin Hood stock. Okay?

I'm saying it and because I love the

company and I love the way they're doing

it, but I also realize that they're a

little expensive right now. Now, maybe

maybe they're a little expensive right

now because people are pricing in a lot

of this enthusiasm, but if there's a dip

on Robin Hood stock, it could be

interesting. Part of that is because

Donald Trump is so kneede when it comes

to regulation and making sure that

regulation, let's just put it this way,

doesn't actually go anywhere. Think

about the SEC and the CFTC for a moment.

So, the Commodity Futures Trading

Commission find Poly Market $1.4 4

million in 2022 blocked US users.

Predicted has been fighting the CFTC for

years. Back when I was running for

governor, predict it was fighting them

for years because I had my name in the

predicted markets. I had like an 11%

chance of being the governor of

California.

It got almost a million votes. You know,

that was great. I think we did very

well. We spent very little per vote that

we got, which is great. I think Gavin

Newsome outspent us like 20 times. Other

people spent even more. Oh, we' have ran

a very efficient campaign. But anyway,

Khi had to sue the CFTC to list their

election contracts. And when they

actually ended up getting a ruling in

their favor that you can't ban election

predicting, everybody got into this.

They're like, "Oh my gosh, this is

great." On top of that ruling and Donald

Trump, most people think prediction

markets are safe from regulation and the

insider trading is going to go on for

ever until some other institution or

agency in the future under a different

president actually changes it. But as

long as Trump is president, I wouldn't

expect to see big regulation here. And

here's why. First of all, the SEC

doesn't get involved in this sort of

derivative insider trading. The CFTC

does. the Commodities and Future Trading

Commission does, but they usually don't

enforce anything unless there's fraud to

get the information. And the FBI and DOJ

only get involved if you actually

defrauded people. Now, people will make

the argument that insider trading is a

form of fraud.

But this is where you have to ask

yourself, how much regulation is there

actually expected to come? When we look

at what's going on with crypto, the

answer is probably very little. Trump is

famously anti-regulation. We know this

because crypto helped Donald Trump get

elected and Donald Trump turned around

and bailed out a whole lot of people.

Remember, Binance got sued by the SEC.

That lawsuit got dropped. The CEO of

Binance, CZ, got pardoned by Donald

Trump. and CZ helped facilitate Donald

Trump's use or the use of Donald Trump's

stable coin to move two billion dollars

of Saudi money on the Binance platform

with Donald Trump's stable coin. So,

there's probably no corruption or money

enthusiasm at all with crypto, right?

>> Corruption is not bad.

Corruption is only bad if I'm not

involved.

But I mean then again, Donald Trump did

argue that he was going to run to be the

crypto president. And so you can see

under the first Trump administration,

the SEC filed 50 cases against

cryptoreated organizations. The Biden

administration doubled that, filing 105

cases against them. And Trump, too, has

literally filed zero cases against

crypto organizations. Now, I'm not here

to say whether or not certain crypto

organizations should be pardoned or not.

I'm just here to tell you it's very

interesting that when Donald Trump gets

involved in a certain way to make money,

the odds are either through donation or

business ties, there's not going to be

any regulation for you. So if you donate

to Trump, you're going to get your cases

dismissed just like Binance, Coinbase,

Consensus, Cumberland, Kraken, Ripple,

Gemini, Tron. All of them either had

reduced settlements, dismissals, or

frozen cases against them. And all of

them either have business ties to Trump

or donated to Donald Trump.

So the point here is if Donald Trump's

trying to make money with his tree of

connections on Wall Street like this,

Trump's connected to the Gemini

founders, the Vinklevosses, they donate

$2 million to a proTrump fundraising

committee and they donate to the White

House ballroom and all of a sudden the

Vinkle Wases invest in American Bitcoin

which the sons of Donald Trump are

co-founding and promoting. All of a

sudden, it looks like sort of a big old

circle. And all of this is very well

known. Like I think these crypto scams

are going on wildly. There's this

company Old Five that have been talking

about on my channel for a very long

time. I think it's a complete scam. The

Trump administration said, "Oh, we're

joining the board." Went on Fox News.

This is the greatest company ever. Soon

as it starts tanking, predictably,

they're like, "No, no, no. We were never

going to join the board." And they just

walk away from it. Meanwhile, innocent

people are throwing their money into

this stuff and they're losing their

money. This is why I make the argument

that companies like Old Five or these

crypto companies that Trump is propping

up are probably nothing more than a tool

to try to create profit for the Trump

administration. And this isn't supposed

to be a slam on the Trump administration

and you know all the grift that's going

on. It's really just to make the

argument that the odds are this

administration is going to do the same

thing for prediction markets that they

did for crypto. That is remove the

regulatory pressure, let all the

nonsense run wild. And the people who

are going to win are not going to be the

people participating in prediction

markets or the gambling that's going on.

They're going to be the broker dealers

like Vlad at Robin Hood that are going

to make a lot of money off of this. Now,

obviously, if we go into a recession,

all these stocks are going to plummet

anyway. We know that and all this sort

of wild west crap will collapse. But the

point is, if you're looking for where to

make money in these prediction markets,

you have to understand it's not the

people mining the gold. It's the people

selling the shovels. Because you've got

Vlad and the Calies or otherwise going,

"Hey, hey, hey, we're different."

Because just because you making a $100

bet at Vegas on a roulette table is

gambling. If someone has an option

contract and there are odds around me or

someone going to gamble at the the Vegas

table at roulette, well, bro, that's

just financial trading. It's not

gambling. And and we're just the broker

putting together a financial product,

giving people the option to make these

trades.

As long as that argument reigns, and

people say that's not gambling, and as

long as the broker dealers have the

protection of the Trump administration,

which I expect they will for a very long

time, at least until Trump loses leaves

office. And as long as there's not a

recession, then the ones who are going

to make bank off of this are the

companies and the owners of stock

related to the companies like Poly

Market, Calshi, Crypto.com, Robin Hood,

all these broker dealers, and anyone

getting into prediction markets. They're

going to get rich because they can make

money way faster and way more often,

remember the churn frequency, than they

can off of options or stocks. He asked

me, he said, "Do you think we should

allow insider trading in prediction

markets?" And I said, "It's it's

actually a pretty it's not as clear-cut

question, right? Because if your goal is

to actually for the 99% of people trying

to get signal about what's going to

happen in the world, like is the Suez

Canal going to be reopened or whatever,

you actually want insider trading. You

want, you know, some admirable admiral

sitting on a ship in the Suez Canal who

has really good information to be

trading so you get better, higher

quality signals.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this." We'll we'll try a

little advertising and see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.