‘Celebrity broker’ Robinhood undergoes a major shift in revenue mix: prediction market revenue now surpasses stock trading

By Long Yue, Wall Street News

The brokerage, which started with zero-commission trading, is turning sports betting and election wagers into a major 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—surpassing both equities and cryptocurrency for the first time to become its second-largest trading segment after options. This shift comes less than two years after Robinhood officially entered the prediction market space.

What does this figure mean? Annualized based on second-quarter data, Robinhood’s prediction market business is already generating over $600 million in annual revenue.

Dan Dolev, equity research analyst at Mizuho Securities, was blunt about it:"Robinhood users simply love to gamble, and prediction markets hit the sweet spot for them. It’s the perfect substitute for cryptocurrency because it delivers that dopamine rush faster—you don’t have to wait."

The logic behind prediction markets is simple: users place binary 'yes/no' bets on real-world events—ranging from World Cup matches and elections to weather outcomes. This instant, straightforward format aligns perfectly with Robinhood’s retail investor base.

Historically, Robinhood’s trading revenue mix has shifted with market trends. During the 2021 meme-stock frenzy, equities and options revenue surged; crypto then took over, with meme coins like Dogecoin driving a spike in crypto trading income. As recently as late 2024, cryptocurrency remained Robinhood’s largest source of trading revenue.

The turning point came around the 2024 U.S. presidential election. Prediction markets saw a sudden surge in popularity, with massive capital flowing in to bet on the election outcome. Kalshi received regulatory approval to operate legally in the U.S. that year, paving the way for other platforms to follow. Robinhood quickly launched its first event contract in late 2024, allowing users to wager on the U.S. presidential election result, and later expanded into sports events and other categories.

The revenue peak in the second quarter was largely driven by the World Cup. In a research note, Ed Engel, equity research analyst at Compass Point, noted that this led to 'exceptionally strong' trading volumes in June and July. He also pointed out that the upcoming American football season this fall could provide another boost.

Robinhood initially did not operate its own prediction market exchange but instead routed user orders to Kalshi, with both parties splitting a fee of two cents per contract evenly.

This arrangement is now changing. In June this year, Robinhood formed a joint venture with Susquehanna International Group to launch the prediction market exchange Rothera and began shifting some orders—including World Cup-related bets—to be executed on this new platform.

The fee structure has also been adjusted. Robinhood now charges users up to one cent per contract, plus an additional variable fee depending on the executing exchange—if an order is still sent to Kalshi, Kalshi charges an extra one cent per contract.

As a result, mutual dependence between the two companies has significantly declined. According to Artemis data, Robinhood’s orders accounted for nearly 50% of Kalshi’s trading volume a year ago but dropped to 17.5% in the second quarter of this year.

Dan Dolev believes that using Rothera will give Robinhood "greater control over its prediction market business." However, he also notes that because Robinhood needs to offer incentives to users, the margin difference between the two models won’t be substantial.

Despite Robinhood’s strong momentum, Kalshi’s leading position in the prediction market remains unchallenged for now. According to Artemis data, Kalshi’s monthly notional trading volume reached approximately $33 billion in June this year, compared to $14 billion for Polymarket and $2.1 billion for Rothera—which executes trades for both Robinhood and certain market makers.

In terms of revenue, Kalshi’s annualized revenue surpassed $2 billion in June this year, roughly tripling since November last year. By contrast, Polymarket’s recent growth has clearly slowed.

Robinhood isn’t the only new entrant. Coinbase also entered the prediction market this year, generating annualized revenue exceeding $100 million from this segment in the second quarter, although specific quarterly figures were not disclosed, and it remains a relatively small player for now.

The boom in prediction markets is accompanied by regulatory uncertainty. Multiple states have filed lawsuits against prediction market platforms, alleging they operate as unregistered gambling applications.

Meanwhile, the federal regulator, the Commodity Futures Trading Commission (CFTC), asserts jurisdiction over prediction markets, classifying them as financial derivatives rather than gambling. The legal tension between these two classifications remains unresolved.

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