This brokerage, which started with zero commissions, is turning sports betting and election wagering into a big business.
Robinhood released its second-quarter earnings last week, forecasting market revenue to surge more than tenfold year-over-year to $156 million, accounting for 20% of total trading revenue and surpassing stocks and cryptocurrencies for the first time to become the second-largest trading business after options. This shift comes less than two years since Robinhood officially entered the prediction market.
What does this number mean? Based on second-quarter data, Robinhood forecasts that its market business has achieved an annualized revenue of over $600 million.
Mizuho Securities equity research analyst Dan Dolev bluntly stated: “Robinhood users love to gamble, and the market predictions perfectly cater to them. It’s the perfect substitute for cryptocurrency because it delivers a faster dopamine hit—you don’t have to wait.”
From Stock Trading to Betting on the World Cup: What Users Are Chasing
The logic of prediction markets is simple: users bet on the outcomes of real-world events—such as World Cup matches, elections, or even the weather—in a "yes/no" format. This immediate and straightforward gameplay aligns perfectly with Robinhood’s retail investor base.
Over time, Robinhood’s trading revenue mix has shifted with market trends. During the 2021 meme stock frenzy, equity and options revenue surged; subsequently, cryptocurrency took over, with meme coins like Dogecoin driving a sharp increase in crypto trading revenue; by the end of 2024, cryptocurrency remained Robinhood’s largest source of trading revenue.
The turning point occurred around the 2024 U.S. election. Predictive markets saw a surge in popularity, with significant capital flowing in to bet on election outcomes. Kalshi was approved to operate legally in the U.S. that year, paving the way for other platforms to follow.
Robinhood launched its first event contract at the end of 2024, allowing users to bet on the outcome of the U.S. presidential election, followed by the gradual addition of categories such as sports events.
The second-quarter revenue peak was largely driven by the World Cup. According to Ed Engel, a stock research analyst at Compass Point, this resulted in "exceptionally strong" trading volumes in June and July. However, he also noted that the start of the American football season this fall is expected to bring another boost.
Build your own trading platform, separate from Kalshi
Robinhood initially did not have its own prediction market platform; instead, it routed user orders to Kalshi, with both parties splitting the revenue equally at a rate of two cents per contract.
This landscape is changing. In June of this year, Robinhood partnered with Susquehanna International Group to launch the prediction market platform Rothera and began routing certain orders—including bets related to the World Cup—to this platform for execution.
The fee structure has also been adjusted. Robinhood currently charges users up to $0.01 per contract, plus an additional fee that varies depending on the execution platform—if the order is still routed to Kalshi, Kalshi charges an additional $0.01 per contract.
As a result, the interdependence between the two companies has significantly decreased. According to Artemis data, Robinhood's share of Kalshi's trading volume has dropped from nearly 50% a year ago to 17.5% in the second quarter of this year.
Dan Dolev believes that using Rothera would give Robinhood "greater control over its prediction markets business." However, he also notes that due to Robinhood’s need to incentivize users, the profit margin differences between the two models will not be significant.
Market landscape: Kalshi remains the leader as competitors enter the space.
Despite Robinhood's strong momentum, Kalshi still holds an untouchable lead in the prediction market space. According to Artemis data, Kalshi's monthly notional trading volume in June reached approximately $33 billion, Polymarket reached $14 billion, and Robinhood (which also executes trades for certain market makers) reached $2.1 billion.
On the revenue side, Kalshi's annualized revenue reached over $2 billion in June this year, a tripling compared to November last year. In contrast, Polymarket's recent growth has clearly slowed.
Robinhood is not the only entrant. Coinbase also entered the prediction market this year, with the annualized revenue from this business exceeding $100 million in the second quarter; however, specific quarterly figures have not been disclosed, and it remains a smaller player.
The growth of prediction markets has been accompanied by regulatory uncertainty. Several states have filed lawsuits against prediction market platforms, alleging that they operate as unregistered gambling applications.
Meanwhile, the U.S. Commodity Futures Trading Commission (CFTC), a federal regulatory agency, asserts regulatory authority over prediction markets, classifying them as financial derivatives rather than gambling. The legal tension between these two classifications has yet to be resolved.