Robinhood's second-quarter earnings revealed a seismic shift in its revenue composition, with prediction market income soaring over tenfold year-on-year to $156 million. This now accounts for 20% of total transaction-based revenue, overtaking both equities and cryptocurrencies for the first time to become the platform's second-largest trading segment, trailing only options. This transformation has occurred less than two years after Robinhood officially entered the prediction market space.
To put that figure in perspective, on an annualized basis, Robinhood's prediction market business is now generating over $600 million in revenue. Mizuho Securities equity research analyst Dan Dolev was blunt in his assessment: "Robinhood users simply love to gamble, and prediction markets hit the mark for them. It's a perfect substitute for crypto because it delivers a faster dopamine hit to the brain—you don't have to wait."
The shift from stock trading to event wagering: What users are chasing
The premise of prediction markets is straightforward: users bet "yes" or "no" on the outcome of real-world events, ranging from World Cup matches and elections to weather patterns. This instant, simple format aligns perfectly with Robinhood's core retail clientele. Looking at the timeline, Robinhood's trading revenue structure has consistently shifted with market trends. In 2021, the meme stock frenzy drove a surge in equity and options revenue. That was followed by the cryptocurrency boom, where meme coins like Dogecoin propelled crypto trading income to new heights. By the end of 2024, crypto was still Robinhood's largest source of trading revenue. The inflection point arrived around the 2024 U.S. presidential election. Prediction markets saw a surge in popularity, with massive capital flows pouring into election outcome bets. Kalshi received regulatory approval to operate legally in the U.S. that year, paving the way for other platforms. Robinhood quickly followed, launching its first event contracts in late 2024, allowing users to wager on the presidential election results, and then expanding into sports categories like soccer matches.
The second-quarter revenue peak was significantly boosted by the World Cup. Compass Point equity research analyst Ed Engel noted in a research note that this drove "exceptionally strong" trading volumes in June and July. However, he also mentioned that the upcoming American football season this autumn is expected to provide another round of momentum.
Building its own exchange and parting ways with Kalshi
Initially, Robinhood did not operate its own prediction market exchange. Instead, it routed user orders to Kalshi, splitting fees equally at $0.02 per contract. That dynamic is now shifting. In June of this year, Robinhood and Susquehanna International Group jointly launched a new prediction market exchange called Rothera. They have already begun diverting some orders—including those related to World Cup wagers—to this new platform for execution. The fee structure has also evolved. Robinhood now charges users up to $0.01 per contract, plus an additional fee that varies depending on the executing exchange. If orders are still sent to Kalshi, that exchange charges an extra $0.01 per contract. The result is a significant reduction in interdependence between the two firms. According to data from Artemis, the proportion of Kalshi's trading volume originating from Robinhood has fallen from nearly 50% a year ago to just 17.5% in the second quarter of this year. Dan Dolev believes that using Rothera will give Robinhood "much more control over the prediction market business." However, he also pointed out that because Robinhood needs to offer incentives to users, the margin difference between the two models will not be substantial.
Industry landscape: Kalshi remains the leader as competitors flood in
Despite Robinhood's rapid growth, Kalshi's dominance in the prediction market space remains unchallenged. As of June, Artemis data shows Kalshi's monthly notional trading volume at approximately $33 billion, compared to $14 billion for Polymarket and $2.1 billion for Rothera (which executes trades for both Robinhood and some market makers). On the revenue front, Kalshi's annualized income in June 2024 had already surpassed $2 billion, roughly tripling since November of the previous year. In contrast, Polymarket's growth has slowed noticeably in recent months. Robinhood is not the only new entrant. Coinbase also entered the prediction market sector this year, generating an annualized revenue of over $100 million from the business in the second quarter, though the exact quarterly figure was not disclosed. It remains a relatively small player for now. The boom in prediction markets is unfolding amid regulatory uncertainty. Several U.S. 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), is asserting its authority over prediction markets, classifying them as financial derivatives rather than gambling. The legal tension between these two characterizations remains unresolved.
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