Robinhood just crossed a milestone that would have been hard to imagine a couple of years ago. For the first time, the company's prediction markets business generated more quarterly revenue than its cryptocurrency trading operation, highlighting how quickly event contracts have become one of Robinhood's fastest-growing products.
The company reported record second-quarter net revenue of $1.31 billion, up 32% from a year earlier. Prediction markets produced $156 million during the quarter, while crypto trading generated $100 million, a 38% year-over-year decline. Those numbers suggest Robinhood's investment in prediction markets is already paying off.
Rothera Is Changing the Business Model
A major reason for the shift is Rothera, Robinhood's own CFTC-licensed exchange and clearinghouse that launched in June through a joint venture with Susquehanna International Group.
Before Rothera, Robinhood primarily offered event contracts supplied by third parties, including Kalshi. Operating its own designated contract market (DCM) and designated clearing organization (DCO) allows Robinhood to keep more of the revenue generated from each trade while maintaining greater control over the customer experience.
That strategy brings several advantages:
- More revenue stays within Robinhood's ecosystem.
- Lower transaction costs can be passed on to customers.
- Product development can move faster without relying on outside exchanges.
- The company gains greater control over future prediction market offerings.
Robinhood executives have described vertical integration as a long-term advantage rather than simply a short-term revenue opportunity.
Event Contracts Continue Their Rapid Rise
Prediction markets have gone from a niche product to a major revenue driver in a remarkably short period of time. Robinhood launched event contracts in 2024. Just two years later, that business generated $156 million in a single quarter while total event contract volume reached 13.6 billion. Rothera alone processed more than 3.5 billion contracts following its June launch, with much of the activity tied to the FIFA World Cup.
CEO Vlad Tenev also highlighted the company's growing diversification during the earnings call. Robinhood now operates 13 separate business lines, each generating more than $100 million in annualized revenue, compared to just three a few years ago.
Legal Questions Still Hang Over the Industry
Despite the impressive growth, prediction markets continue to face legal uncertainty. Multiple states are challenging whether sports-related event contracts should fall under federal derivatives law or state gaming laws. Several lawsuits remain active, while the CFTC continues working through its proposed event contracts rule after recently closing the public comment period.
Those legal questions could shape how quickly companies like Robinhood expand their prediction market offerings. Even with regulatory uncertainty, Robinhood continues investing heavily in the business, suggesting management believes the long-term opportunity outweighs the current risks.
The Trade Handle Prediction Markets Take
One of the biggest takeaways from Robinhood's earnings isn't simply that prediction markets surpassed crypto revenue. It's how quickly that happened. A product category that barely existed on Robinhood two years ago has already become a larger source of quarterly revenue than one of the company's signature businesses.
That trend also says something about the broader industry. Robinhood, Coinbase, Gemini, Binance.US, Kalshi, and Polymarket are all investing heavily in prediction markets, even as legal questions remain unresolved. If companies continue to dedicate this level of capital and infrastructure to event contracts, it becomes increasingly clear that they see prediction markets as a core part of the future of financial trading rather than a temporary opportunity.