Predicting market revenue surpassing stock trading, Robinhood changed from a stock trading platform to an event casino
Author: Long Yue, Wall Street News
Original title: “Influencer Broker” Robinhood's Revenue Structure Has Changed Dramatically: Predicting Market Revenue Has Exceeded Stock Trading
This brokerage firm, which started with zero commissions, is turning gambling and betting on elections into a big business.
Robinhood released its second-quarter earnings report last week, predicting that market revenue surged more than tenfold year-on-year to US$156 million, accounting for 20% of total transaction revenue, surpassing stocks and cryptocurrencies for the first time, becoming the second-largest trading business after options. This change is less than two years since Robinhood officially entered the forecast market.
What does this number mean? Based on data for the second quarter, Robinhood predicts that the annualized revenue of the market business has exceeded 600 million US dollars.
Mizuho Securities stock research analyst Dan Dolev said bluntly: “Users on Robinhood just love to gamble and predict where the market is in their hands. It's the perfect alternative to cryptocurrency because it gives the brain a sense of reward quicker — you don't have to wait.”
From trading stocks to betting on the World Cup: what users are chasing
The logic of predicting the market is simple: users bet on the outcome of real-world events in the form of “yes/no”, including World Cup matches, elections, and even the weather. This instant, simple gameplay is highly compatible with Robinhood's retail user base.
Over the timeline, Robinhood's transaction revenue structure has been shifting along with market hot spots. Stock and options revenue surged during the 2021 meme boom; cryptocurrencies then took over, and memes such as Dogecoin led to a surge in crypto trading revenue; until the end of 2024, cryptocurrencies remained Robinhood's biggest source of trading revenue.
The turning point came around the 2024 US election. A sharp rise in market popularity is predicted, and a large influx of capital is betting on the election results. Kalshi was approved to operate legally in the US that year, paving the way for other platforms to follow suit.
Robinhood then launched its first event contract at the end of 2024, allowing users to bet on the results of the US presidential election, and then launched categories such as sporting events one after another.
The peak in revenue in the second quarter was largely due to the World Cup. Compass Point stock research analyst Ed Engel pointed out in the research report that this made the June and July trading volume “unusually strong.” However, he also mentioned that the US rugby season will begin this fall, which is expected to bring a new round of boost.
Self-built trading platform, “split” with Kalshi
Robinhood initially did not have its own predictive market trading platform; instead, it directed user orders to Kalshi, and the two parties split the fee of 2 cents per contract for 5.5 percent.
This pattern is changing. In June of this year, Robinhood and Susquehanna International Group jointly established the prediction market trading platform Rothera and began transferring some orders (including World Cup-related bets) to the platform for execution.
The fee structure was adjusted accordingly. Robinhood currently charges users up to 1 cent/contract, plus a fee that varies depending on the execution platform — if the order is still sent to Kalshi, Kalshi charges an additional 1 cent/contract.
The result was a marked decline in the interdependence between the two companies. According to Artemis data, the share of Robinhood orders in Kalshi's trading volume fell from nearly 50% in the same period last year to 17.5% in the second quarter of this year.
Dan Dolev believes that using Rothera will give Robinhood “more control over the forecasting market business.” But at the same time, he pointed out that since Robinhood needs to provide incentives to users, the difference in profit margins between the two models will not be too big.
Industry landscape: Kalshi is still the boss, competitors are pouring in
Despite Robinhood's strong momentum, Kalshi's dominance in the prediction market remains unwavering. According to Artemis data, Kalshi's monthly nominal trading volume in June this year was about $33 billion, Polymarket was $14 billion, while Rothera (who also executed transactions for Robinhood and some market makers) was $2.1 billion.
At the revenue level, Kalshi's annualized revenue in June of this year exceeded 2 billion US dollars, an increase of about three times over November last year. In contrast, Polymarket's recent growth rate has slowed markedly.
The Robinhood family is not the only entrant. Coinbase also entered the forecasting market this year. The business's annualized revenue in the second quarter exceeded 100 million US dollars, but no specific quarterly figures were disclosed, and it is still a small player.
Predicting a boom in the market is accompanied by regulatory uncertainty. Several states have filed lawsuits against the prediction market platform, alleging that it operates as an unregistered gambling app.
Meanwhile, the federal regulator, the US Commodity Futures Trading Commission (CFTC), claims to have the right to regulate the prediction market, characterizing it as a financial derivative rather than gambling. The legal tension between the two types of characterization has not yet been clarified.
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