Robinhood should focus on event contracts rather than traditional sports betting offerings as it considers entering the sports wagering market, according to Eilers & Krejcik Gaming (EKG).

Recent market analysis shows new entrants face significant challenges in traditional sports betting. ESPN Bet's mere 1.5% market share of gross gaming revenue (GGR) by November's end demonstrates the difficulty in competing against established players like DraftKings and FanDuel.

Event contracts, which are classified as derivatives by US regulators, offer several advantages for Robinhood:

• Different regulatory framework than traditional sports betting
• Broader potential client base
• Success with previous event contract offerings (election betting)
• No state-by-state licensing requirements
• Alignment with existing trading infrastructure

Robinhood's CEO Vlad Tenev recently mentioned exploring sports wagering opportunities at the company's investor day. With 24.2 million funded clients (half being monthly active users), the company has a substantial potential user base, though EKG notes that a large customer base doesn't guarantee success in sports betting.

Event contracts differ from traditional sports bets by allowing traders to speculate on specific outcomes through "Yes" or "No" positions. These contracts pay out if the position matches the correct outcome; otherwise, they expire worthless.

The Commodity Futures Trading Commission (CFTC) requires futures contracts to provide genuine economic hedging utility and price discovery utility. Season win totals or season-long player props could serve as logical starting points for Robinhood's entry into sports-related event contracts.

Recent developments show growing interest in sports event contracts, with Crypto.com launching Super Bowl and other sports markets where users can fund purchases with digital currencies, though winnings are paid in dollars.

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