[00:00] Donald Trump just bailed out the crypto market, Robinhood stock, and might be setting up a bailout for the stock market. Which is a crazy thing to say with the stock market being within like 4% of all time highs.
[00:15] Kevin, this is delusional. How could I possibly make the argument that Donald Trump is trying to bail out markets again? Well, the SEC just approved a rule change.
[00:30] that not only reduces disclosure, but opens up a big new market for not just crypto, not just Robinhood, both of which we're going to talk about. We'll talk about Robinhood valuations and price targets as well,
[00:44] how this could affect brokers and otherwise. Talk about all that towards the end of this. But he also just opened up a whole new opportunity for people to throw money at the U.S. stock market,
[00:57] especially international folks. So what's a H-E double hockey stick that we're talking about? Because a lot of people are like, Kevin, okay, you know, we heard about this tokenized exchanges thing.
[01:11] So what? Does anybody give a flying F about tokenized stocks? Okay, 24-7 market. That's the headline. If you get stuck there, you won't see how they just orchestrated
[01:23] the most glorious pump for the stock market and crypto. I'm going to show it to you the best way possible with a beautiful whiteboard and some pieces of paper that I printed up and prepared.
[01:36] The easiest way to start by thinking about this is let's say you had $100,000, just to make math easy, in Bitcoin. And let's say a lot of that Bitcoin was appreciated.
[01:49] A lot of, you know, maybe you had a cost basis of $5,000 on it or whatever. A lot of people don't want to sell that Bitcoin because they're going to pay a lot of money in taxes. Especially if they're international, like they're in Europe and they've got to pay like 50% of taxes,
[02:02] or they're in California and they've got to pay a lot of taxes, okay? I'm in California, so I get to dump on it, okay? I tried running for governor. We got like a million, almost a million votes, you know? I thought we kicked butt. We did our best. But I don't really like politics that much, to be truthful.
[02:16] 100K and BTC, let's say you have. A lot of people don't want to leverage up their Bitcoin because there's a lot of volatility risk. Because let's say you hold Bitcoin on chain and then you want to go leverage it up at, I don't know, Binance or whatever else.
[02:34] You can't really offset Bitcoin volatility with stocks. So if Bitcoin goes down, let's say 40%, you could get margin called and then lose your Bitcoin. You don't want that.
[02:46] So there are a lot of people who don't want to sell their Bitcoin, and they don't want to leverage up their Bitcoin because there's too much risk. But what if I told you Donald Trump just made it so anybody who wants to leverage up any crypto asset can now, via what's called a unified, unified, unified is an I or E, I don't know, a unified margin portfolio.
[03:10] that sounds complicated, but basically, imagine you could leverage up crypto in the same margin account, like on-chain crypto, in the same margin account
[03:22] that you hold one-to-one stock, which could be, let's call it, the S&P 500. Well, now you could substantially reduce the volatility for leverage on your crypto portfolio
[03:35] and get exposure to stocks. Now, you might wonder, wait a minute. what does any of that have to do with me or Robinhood? Well, everything. And this is a little complicated to explain,
[03:47] so we're going to do our best on this. But here's basically what happened. I don't think this is a surprise either. The Clarity Act failed three days ago. Midterms were coming up. A lot of the crypto community voted for Donald Trump,
[04:01] but he couldn't get the Clarity Act through. Yes, it was stonewalled by Democrats, but still, they have control of the Senate and the House, and they couldn't get the cloture vote on it. Fine. So what happened?
[04:13] Well, what they did is they just had the SEC pass a rule change. The SEC, the head of the SEC is Paul Atkins. He's a Trump bro.
[04:25] Deregulation, pro-crypto, we're going to do whatever we can. So what did they announce? They announced something called the SEC Innovation Exemption. And this, to me, is a game changer for stocks.
[04:41] So here's how it works. For five years, the five-year exemption, they are removing rules that say anytime you buy a certain asset, it has to be done at the best price.
[04:57] This has to do with stock routing when you go buy stocks. and there's something called the National Best Price or Best Bid or Offer, ballpark like that.
[05:09] What's interesting about that is that was a 2005 rule that just got killed via this exemption for tokenized stocks and you're going to see how this leads to money for the whole economy and the whole market.
[05:21] But watch this. Let's say it's 2004 and you want to go buy, I don't know, Microsoft stock or something like that and let's say $50, okay? And let's say the NYSE is pricing it at $50 and the NASDAQ is pricing it at $50.10.
[05:40] You go ahead and put in an order. Back in the day, you used to have to pick which venue you wanted your trade to go to. Then, in 2005, they came out with a rule change that said,
[05:55] there was Rule 611, for anybody who cares, It was called the trade-through rule, and it required that any time you submitted an order, the order would automatically route to out of 16 exchanges at the time, whichever exchange had the best pricing.
[06:11] Okay, that doesn't really work well if you're going to try to do a tokenized exchange for stocks. And that's where we get to this unified leverage. You'll see that in a moment.
[06:23] So this rule is supposed to protect retail. It removes friction and makes it easier for retail to just put an order in, and you just get the best pricing. And it's all based on that NBBO, National Best Bidder Offer,
[06:38] I'm pretty sure is what that stands for. That's not going to work if you have tokenized stocks, because if you have tokenized stocks how are you going to say tokenized stocks are supposed to have the same best price as these exchanges with really mature markets and mature market makers who you know they all getting their payment folder flow We talk about that in Robinhood in
[06:57] just a moment. But this is really complicated. So what the SEC just said is for five years in a test window, we are going to say that stock tokens backed one-to-one can trade on
[07:11] chain with no exchange registration required and you do not need to receive the best price or offer. This, in addition to
[07:24] another way to raise money, but this is a flawed thing, this basically means the routing rule for stocks on tokens is dead. That sounds bad, but it is a way of opening up
[07:36] all the assets that are on chain that are potentially sitting on massive untaxed, unrealized gains, it is a way for all those folks to potentially move money into stocks,
[07:50] diversifying their on-chain crypto assets, especially if they're leveraged up, to U.S. stocks. So people who have previously never leveraged, I mean, we expect that there's somewhere between $135 to $200 billion
[08:05] just in appreciated Bitcoin that hasn't been taxed. A lot of those people don't want to pay the tax. And a lot of people are nervous that Bitcoin volatility would make them less interested in leveraging. But if you can now buy tokenized stocks
[08:19] and have this unified margin portfolio, you might be facing less risk, and therefore you might want to jump into pumping up the U.S. stock market. Buy the S&P 500, or you buy individual stocks, whatever.
[08:34] The SEC's rule change coming just two days after the Clarity Act failed, I don't think is a surprise. Two days after that fails, they're like, oh, let's go bail out the crypto community a little bit with this tokenized stock exchange tool.
[08:49] And it is a boon for Robinhood and brokers. Here's practically how it would work. I've made a little diagram for this. So let's say you have a share of Microsoft that you hold right here.
[09:03] It's a proprietary share that you hold at a broker or whatever. In order to tokenize this, you need to have a one-to-one backing. And so the broker holds the share. They're now going to tokenize it.
[09:15] Nobody else can buy that. So you've now removed that share from stock market liquidity and turned it into a token. But you've moved that token liquidity to on-chain liquidity.
[09:28] So, in other words, you are taking supply out of the stock market, which increases stock market prices. That is a boost for stock market prices, broadly, in my opinion, over the next few months.
[09:42] It's going to take some time for all this to get implemented. But you are bringing that liquidity to crypto chains, where I think there is an appetite for U.S. stocks, especially because of the privacy aspect that you get with being able to buy these stocks on-chain.
[09:59] Think about it. One of the glorious things about crypto is that it is 100% transparent with wallet addresses. You can see wallet transactions on-chain. I mean, obviously, there are some privacy chains, but broadly, Bitcoin, for example, you see every transaction.
[10:16] Some Layer 2 protocol tried to obscure that, obviously. but international folks who don't want their information known, who don't want to be associated with a wallet, might not be able to buy U.S. stocks.
[10:29] But now by moving U.S. stocks on-chain and the SEC green-lighting that, removing other restrictive rules to enable this, means you can actually now have random wallet addresses
[10:42] moving money into U.S. stocks and you have no idea who it is. In my opinion, this does two things. One, not only does it enable anonymous people to buy U.S. stocks and essentially pumping up the stock market,
[10:58] but as I mentioned earlier, it also allows a crypto investor who has gains in the crypto market to not sell, to leverage up in a more diversified manner through a unified margin portfolio
[11:13] and get the lower volatility of the stock market, which I know it's wild to say the lower volatility of the stock market, but let's be real. The S&P 500 is way less volatile than the crypto market. So when you put these two things together,
[11:25] you have a perfect pump for the stock market that Donald Trump has just set up. It is a pump for the crypto market. It is a pump for the brokers. It is a pump for the stock market.
[11:37] It's honestly kind of brilliant. And them loosening the rules, like no need to get the national best pricer offer, bidder offer, right? It's just a means to an end to pump it for crypto brokers and stocks.
[11:52] Now, what does this mean for Robinhood? And how does Robinhood make money? So this is where things get kind of interesting. Because Robinhood makes a lot of money, obviously, through payment for order flow.
[12:04] And the routing rules are gone, which means you no longer have a really transparent market for these tokenized exchanges. That means spreads could be wider, and Robinhood could make even more money.
[12:21] You obviously get some benefits with a token as well, and this is how Vlad is going to sell this. So let's talk about how this is going to be sold, and then we'll talk about how Vlad makes a lot of money off of it. So the way they sell tokens is they say, hey, they trade 24-7.
[12:37] That's the headline pitch. There's no market open, there's no close, there's no bell. These puppies, they settle in minutes. It's usually about 12 minutes on average is what we see for token settlement. And you can buy it with crypto.
[12:49] You don't have to exchange the dollars first. And then, of course, you know, default protocols, agentic protocols, you can essentially program into your token, which can now directly buy US stocks.
[13:02] Now, in fairness, we've seen some of this already. Right now, there's about a $2.4 billion tokenized stock market right now. It is mostly offshore. These are mostly derivatives and not real ownership, and they're mostly perps.
[13:19] What you're getting now is actual shares backed one-to-one that are tokenized. So it's no more derivative wrapper, it's actual share ownership. So instead of a billion derivatives market you could potentially turn this into a hundreds of billions of dollar inflow market for the stock market And again it all driven by Donald Trump pumping it up baby
[13:46] I swear, you go into the White House, I bet you they put the NASDAQ and the S&P 500 on the screen, and then they play the song, Don't You Know, Pump That Up. So, how does this work for Robinhood?
[14:00] And why is it so interesting for Robinhood to where today Robinhood is up 7.7% and Bitcoin is over 80,000? What's going on here? Why is this happening?
[14:13] We're going to talk about that because Robinhood is going to stand to make lots of money from this. But we've got to clean the whiteboard first and explain how all this kind of crap is going to work. So while I clean the whiteboard, I will remind you that today is coupon code Exploration Day.
[14:26] You can use that coupon code WASHERBALLS and join us. You get all nine courses. It could also be a tax write-off for you. You get every alpha report every day we send the alpha report out, which is pretty much when the market is open.
[14:38] You get all the course number live stream, the tax efficiency courses, the real estate courses, the stock analysis, the technical analysis, the long-term analysis, short-term analysis. And I have to say, some of our latest alpha reports have really been cooking.
[14:51] So I really encourage you to be part of it. But we've been sending a lot of buy alerts on buying the dip, and we've been very optimistic. But we're also very optimistic on certain sectors, and so you can learn about all those theses.
[15:03] If you do join, make sure you watch the September. Honestly, I would re-watch the September 16th, yesterday morning, early portion of yesterday morning's live stream, and then watch today's as well, just to kind of get caught up.
[15:15] You can catch up on the weekend here. Watch those three live streams. kind of get a little bit of a feeling for how we run those live streams and how the alpha reports fit into them. I think there's tremendous value there, and I think you'll make your money back very, very quickly.
[15:29] Obviously, can't guarantee it, but I think you'll love what you get there, so I'd recommend taking a shot on it. So let's talk payments for order flow for a moment, and then let's talk about how Robinhood really prints with this tokenized exchange stuff.
[15:42] So let's say for a moment you're going to go buy, I don't know, cash flow stock, okay? and I'm going to purposely widen this just to make this seem a little bit more clear as a learning lesson because the spreads are pretty narrow on public stocks.
[15:57] So let's say you're going to go buy Tesla stocks at $350 or $360. We're going to call this right here the bid and we're going to call this the ask. This is why you generally see a range of prices
[16:10] when you go buy a stock or an option. They just tend to be a lot closer together. This is very normal. This right here is the spread. a company like Citadel, let's say, is going to come in and they're going to buy inventory.
[16:23] And so let's say they go buy inventory. They're high-frequency traders, so it doesn't really matter where they buy it. They're just trying to get the spread on each side. They're going to go buy inventory at, let's say, $355.
[16:35] And they're considered a market maker. So they sit on NASDAQ or they sit at the NYSE, and they're one of the market makers. They go buy inventory, and then they'll offer to buy some of your shares at $350. and they'll offer to sell some shares at 360.
[16:50] So now, somebody goes in and says, I'm going to go sell Tesla stock and they swipe up on Tesla stock. Okay, fine. There is now a $5 spread between what they pinged you, 350 on a market order,
[17:02] and they bought it for 355. So they made a $5 profit. Okay, how does Robinhood make money? Well, you place that order with Robinhood. So as a thank you,
[17:14] that $5 Citadel is going to provide what's called a rebate. And they might provide, let's say, $2 to Robinhood as a thank you for the payment for order flow.
[17:26] And they're going to keep $3. Now, in reality, instead of this being dollars for really liquid public stocks, these are probably pennies.
[17:38] So a five penny spread gives Robinhood two pennies and the market maker three pennies, as an example. The beautiful thing that you get with low liquid things like a tokenized stock or an option or crypto is you get really wide spreads.
[18:03] Just look right here on screen in front of me. Look at Bitcoin. Why is the bid and the ask $1,500 in spread? Well, that's so the broker can make more money, baby!
[18:16] But it's also trading at a high dollar level. But, I mean, that's a pretty wide spread. You know, we're talking about closer to 2% on a spread. That's a lot! You know, in the case, a 2% spread on Tesla wouldn't be pennies.
[18:28] It would actually be $7. The spread on crypto is almost as big as this spread that we're talking about here on Tesla. And so on public markets, really liquid markets, spreads are generally very, very low.
[18:41] This is why prediction markets are so freaking popular right now. Because you go in to trade in prediction markets, you're generally trading on things that are going to be deemed to be, how should you put it, really low liquidity.
[18:56] Like when Jerome Powell comes out, what is the first phrase he's going to say? Good afternoon. Right? Or what is Kevin Walsh going to say? Good day. Okay, so those are really low liquidity
[19:11] trades compared to the bid and ask that you're going to see on, let's say, Tesla stock, right? Fine. Tokenized exchanges, in my opinion, are going to have really wide spreads. And this is
[19:25] where we get to talking about how Robinhood can make a lot of money from a place they historically have not made a lot of money. Let me try to explain that as clearly as I can.
[19:37] Robinhood right now makes the vast majority of their money from options and crypto, because that's where their kickbacks are going to be the biggest. Again, those rebates or kickbacks, they're not supposed to sound illicit or bad or criminal.
[19:52] It just is what it is. Naturally, you could argue that the market makers are, we're not getting into dark pools or stuff like that, but you could argue the market makers provide liquidity, They're liquidity providers, hence market makers. And if they weren't there, you would have a much more volatile market.
[20:06] So if you think about it, prediction markets don't have market makers, and they're really volatile. There's also lower liquidity. There's more risk for a market maker. So this is the income right now from Robinhood's portfolio.
[20:21] 2025 they made 25 of their money on options Now what really interesting about that is if I pull up this sheet right here I want you to see volumes okay These are volumes You see the red numbers
[20:38] at the top? Stocks do $1 trillion in value, or volume. Crypto does $40 billion. Options do $775 million.
[20:52] That's nothing. Okay? A trillion, 40 bill, $775 million. The vast majority of volume is actually right here in equities.
[21:04] But they only make $300 million. I mean, only. It's a lot. They only make 7% of their 2025 revenue from equities because the markets are so tight. They're getting tiny little pennies. Options are the lowest volume,
[21:17] but they make the most amount of money. Because, you know, some random zero day is going to have, like, a really large spread on the option. Bigger rebate for Robinhood.
[21:29] Cryptocurrency, as I just showed you on Weeble, big spread, 20% of the money going over here. So what does this mean for Robinhood? Well, what it actually means is if they can get a portion, let's call it 10% of the tokenized stock market exchange value at, let's say, call it 10 basis points,
[21:58] Robinhood could potentially, based on some estimates we threw together, Robinhood could potentially double their equities revenue from $300 million to $600 million. Because now they're selling equities in a way higher margin manner.
[22:14] Let me show that to you a little bit differently. And some of these are estimated because we just don't have all the transparency yet, and Robinhood ain't given it all to us yet. And that's okay. It might be their proprietary yet, right?
[22:26] But I want you to see this. Who pays for free trades? These are basis points. So for every $100 that you trade, it costs you about $1.4 to trade.
[22:40] Who cares? You go buy $100 worth of stocks, it costs you $1.4 pennies. Nobody freaking cares. We used to pay $7 a trade back in the stock trade days. You've got to make a 7% return on $100 before you just break even on your stupid cost.
[22:56] So the cost for equities has turned negligible. That's why Robinhood doesn't make that much money from equities. They do a ton of volume, but they don't make that much money from it. That's where the opportunity is with tokenized stocks,
[23:09] and that's why Robinhood is up today. Look at this. Options, they make about $0.48. Crypto, they make about $0.53. On prediction markets, they make about $1.20 per $100.
[23:23] so they're making most of their money here on now prediction markets but that's not where most of the volume is yet but that's why so many people are so excited about prediction markets because they make money baby you know the exchanges
[23:35] make a lot of money and people have fun with it you know it's a cool way you don't have to go to a casino you don't have to go get drunk at the casino or whatever you can make bets on things that are fun sports what's Kevin Walsh going to say
[23:47] whatever right I don't think there's anything wrong with that but tokenized stocks which we just talked about as basically being a big pump for the market is also a big pump for Robinhood because you're going to make somewhere between probably four to eight times as much money
[24:02] on tokenized stocks. We don't know. So this 10 cents per $100 is an estimate. It could end up being a whole lot more. Because remember earlier in the segment, we said they got rid of NBBO,
[24:14] National Best Bidder Offer. They got rid of that. So there's no requirement to get you the best price. the spreads are probably going to be wide.
[24:26] People who want to leverage up their crypto and actually diversify to stocks can now not only pump up the stock market, but can also pump up Robinhood.
[24:38] So, a direct way to play this tokenization change is Robinhood. Robinhood right now trades for about a two-pack. I do think that Robinhood's growth will accelerate substantially from prediction markets
[24:53] because it's a platform a lot of people already use. But I also think that Robinhood has a big W from this change here. And I personally don't think it's a surprise that Robinhood is often at the White House.
[25:08] Now, yesterday when I was putting this data together, our stock AI indicated that Robinhood had about a 9% to 10% upside. but now the stock has run roughly to where the fair value sits right now on our stock product,
[25:21] which you can kind of see the early version of this in our course membership. Remember that's at meetreinvest.com. Our terminal is launching in November, which we're really excited about. Research terminal, data terminal, it's going to be really fun.
[25:35] But anyway, I actually think this could be low because this does not price in yet. this, this money right here is not in this valuation yet on screen
[25:48] because this rule change just happened yet. People don't have estimates for this yet. I actually think this tokenized exchange stuff could possibly pump this by somewhere around 20 to 30%. So if I take 120 and I multiply that by, say, 30%,
[26:02] we might be at $156, which is sort of a fair value for Robinhood. But this isn't just a pump for crypto or a pump for Robinhood, where fewer people have to sell crypto because now they can leverage up against their crypto
[26:14] in a safer way to buy stocks. But it's also a pump for Robinhood, so Robinhood and crypto. That's the obvious play. But I personally think it is a bullish play for the entire stock market.
[26:29] It's potentially hundreds of billions of dollars of liquidity for U.S. stocks that didn't exist before Donald Trump decided to have his crony, Paul Atkins, change the rules.
[26:42] So, as we have in the comments here, what I'm hearing is the bubble is just about to get bigger. And when it rains, or when the rains get tightened, it will hit harder.
[26:55] It goes both ways. Yep. And we are on the inflating bubble side of that. I'm sharing my advertising. These things each hold a feel. I feel like nobody else knows about it. We'll try a little advertising and see how it goes.
[27:07] Congratulations, man. You have done so much. People love you. People look up to you. Kevin Pass left there. Bye, nice to run with. And you two got to meet Kevin. Always great to get your take.