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Robinhood Revenue Structure Undergoes Major Shift: Forecasted Market Revenue Surpasses Stock Trading

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Robinhood's second-quarter financial report shows that forecasted market revenue is expected to grow over tenfold to $156 million year-on-year, surpassing stock and cryptocurrency business for the first time, becoming the second largest trading revenue source after options.

Original Title: "Robinhood, the 'Social Media Darling' of Brokerages, Undergoes Huge Revenue Transformation: Market Forecasting Revenue Surpasses Stock Trading"

This brokerage, known for its zero-commission model, is turning sports betting and election speculation into big business.

Robinhood released its second-quarter earnings report last week, forecasting a year-over-year surge of over tenfold in market forecasting revenue to $156 million, accounting for 20% of total revenue, surpassing stocks and cryptocurrencies for the first time and becoming the second-largest trading business after options. This change comes less than two years after Robinhood officially entered the market forecasting space.

What does this number mean? Based on second-quarter data, Robinhood's annualized revenue from market forecasting business has exceeded $600 million.

Dan Dolev, a stock research analyst at Mizuho Securities, candidly stated, "The users on Robinhood love to gamble, and market forecasting is right up their alley. It is the perfect alternative to cryptocurrency because it can quickly bring a sense of reward to the brain—you don't have to wait."

From Stock Trading to Betting on the World Cup: What Users Are Chasing

The logic of market forecasting is simple: users bet on the outcome of real-world events in a "yes/no" format, including World Cup matches, elections, and even the weather. This immediate, straightforward gameplay aligns well with Robinhood's retail user base.

Along the timeline, Robinhood's trading revenue structure has always shifted with market trends. During the 2021 meme stock frenzy, stock and options revenue skyrocketed; then cryptocurrencies took the lead, with meme coins like Dogecoin driving up crypto trading revenue; until the end of 2024, cryptocurrency remained Robinhood's largest trading revenue source.

The turning point came around the 2024 U.S. presidential election. Market forecasting gained immense popularity, with significant funds flowing into election result bets. Kalshi was approved to operate legally in the U.S. that year, paving the way for other platforms to follow suit.

Subsequently, Robinhood launched its first event contract at the end of 2024, allowing users to bet on the U.S. presidential election results, followed by the gradual rollout of sports events and other categories.

The revenue peak in the second quarter was largely attributed to the World Cup. Ed Engel, a stock research analyst at Compass Point, noted in a research report that this led to "exceptionally strong" trading volumes in June and July. However, he also mentioned that the U.S. football season is set to kick off this autumn, bringing expectations of a new round of boosts.

Building Its Own Trading Platform, Robinhood Goes Separate Ways from Kalshi

Initially, Robinhood did not have its own prediction market trading platform. Instead, it routed user orders to Kalshi, with both parties sharing a 50-50 split of the 2-cent fee per contract.

This landscape is now changing. In June of this year, Robinhood formed a joint venture with Susquehanna International Group to establish the prediction market trading platform Rothera. They began redirecting some orders (including bets related to the World Cup) to this platform for execution.

The fee structure has also been adjusted accordingly. Robinhood now charges users up to 1 cent per contract, plus an additional fee that varies depending on the execution platform—if orders are still directed to Kalshi, Kalshi also charges an extra 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 orders to Kalshi's trading volume has dropped 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 enable Robinhood to "have more control over the prediction market business." However, he also points out that due to Robinhood's need to incentivize users, the profit margin difference between the two models will not be significant.

Industry Landscape: Kalshi Still Dominates as Competitors Enter

Despite Robinhood's strong momentum, Kalshi's dominant position in the prediction market remains unchallenged. According to Artemis data, Kalshi's monthly nominal trading volume in June was approximately $33 billion, Polymarket was $14 billion, and Rothera (which also executes trades for Robinhood and some market makers) was $21 billion.

In terms of revenue, Kalshi's annualized revenue in June exceeded $2 billion, nearly tripled from November last year. In contrast, Polymarket has recently seen a significant slowdown in growth.

Robinhood is not the only new entrant. This year, Coinbase also entered the prediction market, with the business generating over $1 billion in annualized revenue in the second quarter, although specific quarterly figures were not disclosed, making it still a relatively small player.

The prosperity of the prediction market is accompanied by regulatory uncertainty. Several states have filed lawsuits against prediction market platforms, alleging that they operate as unregistered gambling applications.

Meanwhile, the federal regulatory agency, the Commodity Futures Trading Commission (CFTC), claims regulatory authority over the prediction market, categorizing it as a financial derivative rather than gambling. The legal tension between these two categorizations has not yet been resolved.