This broker, which started with zero-commission trading, is turning sports betting and election wagering into a major business.
Robinhood released its second-quarter earnings last week, revealing that revenue from its predictive markets business skyrocketed more than tenfold year-over-year to $156 million. This accounted for 20% of total trading revenue, surpassing income from stocks and cryptocurrencies for the first time to become the second-largest trading business after options. This change comes less than two years after Robinhood formally entered the predictive markets space.
What does this number signify? Extrapolating from Q2 data, Robinhood's predictive markets business is on an annualized revenue run rate exceeding $600 million.
Mizuho Securities equity research analyst Dan Dolev was blunt in his assessment: "Robinhood's users love to gamble, and predictive markets hit the spot. It's a perfect substitute for crypto because it gives the brain that reward feeling faster—you don't have to wait."
From Stocks to Betting on the World Cup: What Are Users Chasing?
The logic of predictive markets is simple: users bet on the outcome of real-world events—including World Cup matches, elections, and even weather—in a "yes/no" format. This immediate, straightforward gameplay highly resonates with Robinhood's retail user base.
Timeline-wise, Robinhood's trading revenue structure has consistently shifted with market trends. During the 2021 meme stock frenzy, revenue from stocks and options surged; subsequently, cryptocurrencies took over, with meme coins like Dogecoin driving a spike in crypto trading revenue. Until late 2024, cryptocurrency remained Robinhood's largest source of trading revenue.
The turning point came around the 2024 U.S. presidential election. Interest in predictive markets soared, with massive inflows of capital betting on election outcomes. Kalshi's approval for legal operation in the U.S. that year paved the way for other platforms to follow suit.
Robinhood then launched its first event contract in late 2024, allowing users to wager on the U.S. presidential election result, and subsequently rolled out categories like sports events.
The revenue peak in Q2 was largely fueled by the World Cup. Compass Point equity research analyst Ed Engel noted in a report that this led to "exceptionally strong" trading volumes in June and July. However, he also mentioned that the upcoming U.S. football season this fall is expected to provide a new boost.
Building Its Own Trading Platform, and "Splitting" from Kalshi
Initially, Robinhood did not have its own predictive markets trading platform. Instead, it routed user orders to Kalshi, with the two parties splitting a fee of 2 cents per contract 50/50.
This landscape is changing. In June of this year, Robinhood partnered with Susquehanna International Group to establish the predictive markets trading platform Rothera and began migrating 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 1 cent per contract, plus an additional fee that varies depending on the execution venue—if the order is still sent to Kalshi, Kalshi charges an additional 1 cent per contract.
The result is a significant decrease in the interdependence between the two companies. According to Artemis data, the proportion of Robinhood's orders in Kalshi's trading volume has dropped from nearly 50% a year ago to 17.5% in Q2 of this year.
Dan Dolev believes that using Rothera will give Robinhood "more control over its predictive markets business." However, he also pointed out that the difference in profit margins between the two models may not be substantial, as Robinhood needs to provide incentives to its users.
Industry Landscape: Kalshi Still the Leader, Competitors Pour In
Despite Robinhood's strong momentum, Kalshi's dominance in the predictive markets remains unchallenged for now. According to Artemis data, Kalshi's monthly notional trading volume in June this year was approximately $33 billion, Polymarket's was $14 billion, while Rothera's (which executes trades for Robinhood and some market makers) was $2.1 billion.
In terms of revenue, Kalshi's annualized revenue run rate exceeded $2 billion in June this year, roughly triple the figure from November last year. In contrast, Polymarket's growth has noticeably slowed recently.
Robinhood is not the only new entrant. Coinbase also entered the predictive markets space this year, with its Q2 annualized revenue from this business exceeding $100 million. However, specific quarterly figures were not disclosed, and it remains a smaller player for now.
The boom in predictive markets is accompanied by regulatory uncertainty. Several states have filed lawsuits against predictive market platforms, alleging they operate as unregistered gambling applications.
Meanwhile, the federal regulator, the Commodity Futures Trading Commission (CFTC), asserts jurisdiction over predictive markets, classifying them as financial derivatives rather than gambling. The legal tension between these two classifications has yet to be resolved.
