How Robinhood's Prediction Markets Became Their Fastest-Growing Product

Robinhood's prediction markets business is booming, with quarterly revenue surging more than sixfold as traders increasingly bet on everything from Federal Reserve decisions to Bitcoin price moves.

In fact, prediction markets have become Robinhood's fastest-growing product ever launched, and the company's latest earnings suggest that they are evolving into something much bigger.

In a new interview with Coinage's Market Signal, Robinhood Vice President and General Manager of Futures and Prediction Markets JB MacKenzie said even the company was caught off guard by how quickly the business took off.

"I think we were all surprised with the speed of which prediction markets grew within Robinhood," MacKenzie said. "It's the fastest growing product we've ever launched."

That growth was on full display in Robinhood's third-quarter earnings this Tuesday, when the company reported $173 million in event-contract revenue, more than six times what it generated a year earlier. Customers traded a record 16.4 billion event contracts during the quarter, more than seven times the year-earlier level.

Prediction markets have now surpassed Robinhood's traditional stock-trading business in transaction revenue, with the $173 million generated by event contracts exceeding the $121 million brought in by equities. They also outpaced cryptocurrency transaction revenue, which fell 55% from a year earlier to $120 million. Options remained the company's largest transaction-based revenue category at $399 million.

The broader company reported record quarterly revenue of $1.42 billion, up 12% from a year ago, although net income declined 14% to $476 million. But perhaps the most revealing development wasn't just how much activity Robinhood's prediction markets generated. It was where that activity was coming from.

Non-sports contracts accounted for roughly 30% of prediction-market activity during the third quarter, doubling from about 15% in the previous quarter. That shift offers a glimpse of how Robinhood is attempting to turn prediction markets into an entirely new category of financial trading.

"Our largest traded contract in September was our federal rate decision," MacKenzie said. "Nobody would have thought that versus sports."

MacKenzie also pointed to growing interest in short-term contracts tied to the price movements of Bitcoin, Ethereum, gold and crude oil.

"The fastest growing product that we have on our platform, you know, basically since August has been the 15-minute up, down crypto, Bitcoin, Ethereum, as well as gold and crude oil contracts," he said.

Coinbase, on the other hand, has seen its traders move in the other direction. The company, which reported its own earnings two days later, pointed to an increase in crypto traders beginning to cross over into trading other prediction markets like the election.

"If you look at our contract mix... over 50% of our contract volume comes from non-sports categories," Shan Aggarwal told Coinage. "When our traders actually trade predictions, they go on to trade incremental spot crypto volume. So it's deepening engagement and deepening activity amongst the users on our platform."

At the same time, Robinhood is pursuing a strategy built around multiple exchange relationships, rather than relying exclusively on its own marketplace.

MacKenzie told Coinage that Robinhood was already offering contracts sourced from four different exchanges, with liquidity, contract resolution and competitive pricing among the most important factors in determining which products reach customers.

The company has also been working with Cboe Global Markets to develop financial and security-based event contracts, a potential new competitive front as established exchanges increasingly explore prediction markets.

Still, Robinhood faces questions about how much of the surge in trading reflects genuinely new customer demand versus existing traders shifting activity between products. And while contract volumes have grown dramatically, competition, pricing and the costs of building out exchange infrastructure could influence how much of that activity ultimately translates into profits.

Regulatory uncertainty remains another potential obstacle, particularly as lawmakers and regulators debate how event contracts should be classified and supervised.

"What we don't want to do is shut that engagement down and send it overseas," MacKenzie said. "If we do that, then we're failing as an industry."

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