As Tom Brady bagged his seventh Super Bowl, I got to thinking about an interesting trend I was seeing. I was hearing more ads for DraftKings every day. At the same time, Robinhood is exploding in popularity and its army of small traders is moving markets. Were these two related?
DraftKings, an online sports betting app, is exploding in popularity. It’s revenue doubled in the last year, and its stock is on a tear:
The stock-trading app Robinhood is also growing at an incredible rate. It doubled its payment for order flow revenue, its main revenue source, in just a few months in 2020 as the lockdowns hit.
Robinhood gamifies investing in a way that can mimic online gambling, and much of the trading on the platform, including in stocks like Gamestop and AMC, seems to be speculative.
I think both trends come from a big increase in personal income due to stimulus and extra unemployment payments. Put that extra money into the hands of someone who is bored and has fewer other ways to spend, and you see big increases in gambling…err, “investing”.
With another large stimulus planned, I expect to see more of this in the future. I also wonder where else this extra cash will show up.
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