Robinhood’s revenue mix is shifting fast. In its second-quarter earnings released last week, the brokerage said prediction market revenue surged more than tenfold from a year earlier to $156 million, making up 20% of total transaction-based revenue. The business moved ahead of both stocks and crypto for the first time and became Robinhood’s second-largest trading segment after options. The milestone came less than two years after the company formally entered prediction markets.
Based on second-quarter figures, Robinhood’s prediction market business is now running at an annualized revenue pace of more than $600 million.
Dan Dolev, an equity research analyst at Mizuho Securities, was blunt in his assessment: "Users on Robinhood just like to gamble, and prediction markets fit them perfectly. It is a perfect substitute for crypto because it gives the brain a reward faster — you don’t need to wait."
From stock trading to event contracts
The model is straightforward. Users place yes-or-no wagers on the outcome of real-world events, including World Cup matches, elections and even the weather. That simple and immediate format lines up closely with Robinhood’s retail user base.
Robinhood’s transaction revenue has long followed whatever theme was drawing retail attention. During the meme-stock surge in 2021, stock and options revenue climbed sharply. Crypto took over later, with meme tokens such as DOGE helping lift crypto trading revenue. As recently as the end of 2024, crypto was still Robinhood’s largest transaction revenue source.
The inflection point came around the 2024 U.S. election. Interest in prediction markets rose quickly, and capital flowed into contracts tied to the election result. Kalshi’s approval to operate legally in the U.S. that year also helped clear the way for other platforms to move in.
Robinhood then launched its first event contracts in late 2024, letting users bet on the outcome of the U.S. presidential election. It later expanded into sports and other categories. The second-quarter revenue spike was driven in large part by the World Cup. Ed Engel, an equity research analyst at Compass Point, wrote in a research note that trading volumes in June and July were "exceptionally strong." He also said the U.S. football season begins this fall and could provide another lift.
Robinhood is building its own venue
Robinhood did not start with its own prediction market trading platform. At first, it routed customer orders to Kalshi, with the two companies splitting a 2-cent-per-contract fee equally.
That arrangement is changing. In June, Robinhood and Susquehanna International Group formed a joint venture called Rothera, a prediction market trading platform that has started handling part of Robinhood’s order flow, including World Cup-related contracts.
The fee structure changed as well. Robinhood now charges users as much as 1 cent per contract, plus another fee that varies depending on which venue executes the trade. If an order is still sent to Kalshi, Kalshi charges an additional 1 cent per contract.
The result is a weaker operational dependence between the two firms. According to Artemis data, Robinhood-linked orders accounted for 17.5% of Kalshi’s trading volume in the second quarter, down from nearly 50% a year earlier.
Dolev said using Rothera would give Robinhood "more control over the prediction market business." He added, though, that margins are unlikely to differ much between the two models because Robinhood still needs to provide incentives to users.
Kalshi still leads as rivals move in
Robinhood’s growth has been strong, but Kalshi remains the dominant player in prediction markets. Artemis data shows Kalshi posted roughly $33 billion in monthly notional trading volume in June, compared with $14 billion for Polymarket and $2.1 billion for Rothera, which also executes trades for Robinhood and some market makers.
On the revenue side, Kalshi’s annualized revenue in June rose past $2 billion, about triple its level in November last year. Polymarket, by contrast, has seen its recent growth slow markedly.
Robinhood is not the only new entrant. Coinbase also entered prediction markets this year. Its annualized revenue from the business exceeded $100 million in the second quarter, though the company did not disclose a quarterly figure and it remains a relatively small participant.
Regulatory questions remain unresolved
The expansion of prediction markets is being matched by legal uncertainty. Multiple states have filed lawsuits against prediction market platforms, arguing that they are operating as unregistered gambling applications.
At the same time, the U.S. Commodity Futures Trading Commission, or CFTC, says it has authority over prediction markets and treats them as financial derivatives rather than gambling products. The legal tension between those two positions has not been resolved.