Robinhood projected that its market-making revenue for the second quarter would surge more than tenfold year-over-year to $156 million, surpassing equities and cryptocurrencies for the first time and accounting for 20% of total trading revenue, making it the second-largest business segment after options. At this rate, annualized revenue could exceed $600 million.
The brokerage, which started with zero commissions, is turning sports betting and election wagering 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—making it the second-largest trading segment after options, surpassing both equities and cryptocurrency for the first time. This shift comes less than two years after Robinhood officially entered the prediction market space.
What does this figure signify? 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, put it bluntly: "Users on Robinhood simply love to gamble, and prediction markets cater directly to their preferences. It’s the perfect substitute for cryptocurrency because it delivers a faster dopamine hit—you don’t have to wait."
From Stock Trading to World Cup Betting: What Are Users Chasing?
The logic behind prediction markets is straightforward: users place bets in a binary 'yes/no' format on the outcomes of real-world events—ranging from World Cup matches and elections to weather conditions. This simple, immediate gameplay aligns closely with Robinhood’s retail user base.
Historically, Robinhood’s trading revenue mix has shifted alongside market trends. During the 2021 meme stock frenzy, revenue from equities and options surged; subsequently, cryptocurrencies took the lead, with meme coins like Dogecoin driving a spike in crypto trading revenue. As late as the end of 2024, cryptocurrency remained Robinhood’s largest source of trading revenue.
The turning point came around the 2024 U.S. presidential election. Interest in prediction markets soared, with substantial capital flowing in to bet on election outcomes. Kalshi received regulatory approval that year to operate legally in the U.S., paving the way for other platforms to follow. Robinhood swiftly launched its first event contract at the end of 2024, allowing users to wager on the U.S. presidential election result, and later expanded to include 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 mentioned that the upcoming American football season this fall is expected to provide another boost.
Building Its Own Exchange, Parting Ways with Kalshi
Robinhood initially did not operate its own prediction market exchange but instead routed user orders to Kalshi, with both parties splitting a fee of $0.02 per contract evenly.
This dynamic is now changing. In June of 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 that platform.
The fee structure has also been adjusted. Robinhood currently charges users up to $0.01 per contract, plus an additional variable fee depending on the executing exchange—if orders are still sent to Kalshi, Kalshi levies an extra $0.01 per contract.
As a result, the mutual dependency 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 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 will not be substantial.
Industry Landscape: Kalshi Remains Dominant as Competitors Enter the Market
Despite Robinhood’s strong momentum, Kalshi’s dominant position in the prediction market remains unchallenged for now. According to Artemis data, Kalshi’s nominal monthly 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 rate has clearly slowed.
Robinhood is not the only new entrant. Coinbase also entered the prediction market this year, generating annualized revenue exceeding $100 million in the second quarter, though specific quarterly figures were not disclosed; it remains a relatively small player for now.
The boom in prediction markets has been accompanied by regulatory uncertainty. Multiple states have filed lawsuits against prediction market platforms, alleging they operate as unregistered gambling applications.
Meanwhile, the U.S. CommodityFutures TradingCommission (CFTC), a federal regulator, asserts jurisdiction over prediction markets, classifying them as financial derivatives rather than gambling. The legal tension between these two characterizations has yet to be resolved.