Robinhood's business focus shifts as market revenue surges tenfold

According to Woofun AI, the revenue structure of zero-commission brokerage firm Robinhood (HOOD.US) has been fundamentally reshaped, and the predictive market business has replaced stock trading as its second-largest revenue pillar. This shift marks the company's strategic leap from traditional securities trading to event-driven financial products. Its core driving force is predicting explosive growth in market revenue, completely changing the previous revenue model that relied on stock and cryptocurrency trading.

Judging from the evolution of user behavior, Robinhood's transactional revenue stream has always drifted 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 their biggest source of trading revenue.

However, the turning point came around the 2024 US election, which predicted a sharp rise in market sentiment and a massive influx of capital to bet 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. 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.” This instant, simple gameplay is highly compatible with Robinhood's retail user base. 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. 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. According to data compiled by Woofun AI, Robinhood predicted that market revenue for the second quarter would skyrocket 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.

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.

In terms of strategic independence, Robinhood is restructuring the cost structure by building its own infrastructure. Initially, Robinhood did not have its own prediction market exchange; instead, it directed user orders to Kalshi, and the two parties split the cost of 2 cents per contract.

This pattern is changing. In June of this year, Robinhood and Susquehanna International Group jointly established the prediction market exchange 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 per contract, plus a fee that varies depending on the execution of the exchange — 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. 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.

In terms of the industry landscape, Kalshi is still the boss, and competitors are pouring in. Despite Robinhood's strong momentum, Kalshi's dominance in the prediction market remains unwavering. Kalshi's monthly nominal trading volume in June this year was around $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 (COIN.US) 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 relatively small player. Predicting a boom in the market is accompanied by uncertainty at the regulatory level. 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 power to regulate the prediction market, characterizing it as a financial derivative rather than gambling. The legal tension between the two characterizations has yet to be clarified.