Prediction Markets Hit $156M, Surpassing Crypto to Become Robinhood's Second-Largest Revenue Stream

Woofun AI reports that Robinhood has fundamentally restructured its revenue engine, pivoting from its zero-commission origins to establish prediction markets as a core profit center. This strategic shift marks a departure from traditional stock trading, cryptocurrencies, and options, positioning event-based wagering as the new growth vector for the brokerage.

The financial impact of this pivot was quantified in the second quarter, where prediction market revenue surged to $156 million. This figure represents a ten times increase year-over-year and accounts for 20% of total trading revenue. For the first time in the company’s history, this segment surpassed both stocks and cryptocurrencies to become the second-largest trading business, trailing only options.

Annualizing these second-quarter results projects prediction market revenues exceeding $600 million. Dan Dolev, a stock research analyst at Mizuho Securities, attributed this surge to user psychology, noting that the platform caters to a desire for quicker rewards. He described prediction markets as an ideal substitute for cryptocurrencies, offering immediate feedback loops that align with the behavioral patterns of Robinhood’s retail base.

The mechanics of these markets rely on users placing 'yes/no' predictions on real-world outcomes, ranging from World Cup matches and elections to weather conditions. This model contrasts with Robinhood’s historical revenue drivers, such as the meme stock boom in 2021 or the crypto rally led by tokens like DOGE. By the end of 2024, cryptocurrencies remained the largest source of trading revenue, but the structural shift toward event-based betting has since accelerated.

A critical turning point emerged around the 2024 U.S. elections, which triggered a massive influx of capital into prediction markets. Kalshi received approval to operate legally in the U.S. that same year, establishing a regulatory precedent. Robinhood capitalized on this momentum by launching its first event contract at the end of 2024, allowing users to bet on the U.S. presidential election, followed by expansions into sports events.

The second quarter’s revenue peak was largely driven by the World Cup, which generated exceptionally strong trading volumes in June and July. Ed Engel, a stock research analyst at Compass Point, highlighted this seasonal spike and noted that the NFL season starting this fall could provide another significant boost to trading activity and revenue generation.

Operationally, Robinhood is moving away from its initial dependency on Kalshi, where it previously redirected user orders and split fees of 2 cents per contract evenly. In June, the firm partnered with Susquehanna International Group to launch Rothera, its proprietary prediction market trading platform. This move allows Robinhood to execute orders internally, including those related to the World Cup, thereby retaining more control over the transaction flow.

The fee structure has been adjusted to reflect this operational shift, with Robinhood charging users up to 1 cent per contract plus a variable platform fee. For orders still sent to Kalshi, an additional 1 cent per contract is charged. Per Woofun AI, the proportion of Robinhood’s orders in Kalshi’s total trading volume dropped from nearly 50% in the same period last year to 17.5% in the second quarter. Dan Dolev noted that while Rothera offers more control, the need for user incentives limits the profit margin difference between the two models.

Despite Robinhood’s growth, Kalshi maintains dominance, with monthly nominal trading volume reaching $33 billion in June. Polymarket followed with $14 billion, while Rothera handled $2.1 billion. Kalshi’s annualized revenue exceeded $2 billion in June, up three times from November last year. Coinbase also entered the market, with annualized revenue surpassing $100 million in the second quarter, though it remains a smaller player compared to the established leaders.

The expansion of prediction markets is occurring amidst significant regulatory uncertainty. Several states have filed lawsuits against platforms, accusing them of operating as unregistered gambling apps. Conversely, the federal regulator CFTC claims jurisdiction, classifying these instruments as financial derivatives rather than gambling. This legal tension between state-level enforcement and federal classification remains unresolved, posing a persistent risk to the sector’s long-term stability.