From Stock Predictions to Sports Betting: How Robinhood’s Prediction Markets Could Drive $200 Million in Revenue

Analyst estimates are based on September volume of $2.6 billion, with reports suggesting that Robinhood customers account for up to 35% of the Kalshi volume on any given day. This influx of retail interest mirrors the massive surge seen in sports betting, as traders increasingly look to high-stakes prediction markets to replicate the adrenaline and volatility found in modern gambling platforms.

Robinhood Markets (NASDAQ: HOOD) is making notable strides in the football prediction market, which is proving beneficial for both the company’s reputation and financial backers.

Investing app — Image by stux from Pixabay

According to a recent report by Piper Sandler analyst Patrick Moley, the prediction markets that Robinhood has partnered with Kalshi have achieved an impressive volume of $2.6 billion in just the current month. This volume is more than double the previous monthly high for the brokerage firm. Moley estimates that if this trend continues, Robinhood’s prediction markets could potentially generate an additional $200 million in annual revenue.

“Prediction markets present significant upside opportunities for Robinhood,” stated Moley, reaffirming an ‘overweight’ rating while increasing the price target for Robinhood shares from $120 to $140.

Notably, Robinhood has not publicly disclosed its monthly prediction market volumes; hence, forecasts provided by analysts typically depend on estimated calculations and insights from the company’s management. In their second-quarter report, Robinhood indicated that over a billion yes/no contracts were traded on its platform. Given that football is the most popular sport for wagers in the U.S., experts expect these numbers will surge in the upcoming quarter.

How Robinhood Fuels Kalshi’s Growth

Earlier this year, Robinhood announced a collaboration with Kalshi for event contracts tied to the Super Bowl, although the initiative faced hurdles when the Commodities Futures Trading Commission (CFTC) requested more information. Fortunately, both companies persisted with their strategy.

Moley suggests that based on the second-quarter performance, Robinhood’s clients accounted for around 27% of Kalshi’s total turnover during that period. On any given day, up to 35% of Kalshi’s volume can be attributed to Robinhood’s customers.

Utilizing Kalshi’s predicted volume for the third quarter of 2025, which is projected at 8,500 million contracts, and assuming Robinhood captures a 30% share, the expected volume of Robinhood contracts would be around 2,550 million. This could lead to approximately $25.5 million in revenue, translating to an expected quarterly run rate exceeding $100 million and around $17.5 million just in September.

According to Moley, under the contractual terms with Kalshi, both companies share the two-cent fee per contract paid by traders. He estimates that the year-over-year increase in prediction market volumes at Robinhood could reach 150% for the current quarter.

Legal Challenges Ahead for Robinhood

The foray into the prediction market has also seen Robinhood embroiled in legal issues across multiple states, including Massachusetts, Nevada, and New Jersey. Recently, Robinhood filed a lawsuit against the Massachusetts Attorney General and the state’s gaming regulator, asserting that state regulations exceed the Commodities Exchange Act (CEA).

Additionally, Robinhood has been included as a co-defendant in litigation involving Kalshi, brought forth by various tribal gaming organisations in California. These entities argue that Kalshi, along with involved parties like Robinhood, are violating the Indian Gaming Regulatory Act (IGRA). With such significant legal stakes in play, a quick resolution to these lawsuits appears unlikely.

Experts note, “The financial dynamics are substantial on both ends. With ongoing litigation, there may be a pressing need for Congress to clarify the CEA’s language and intent concerning U.S. gaming and financial markets.”

In summary, Robinhood’s venture into prediction markets showcases its potential for generating considerable revenue while simultaneously navigating obstacles and legal predicaments. Its relationship with Kalshi appears to be a fruitful collaboration, with predictions suggesting a promising future amidst the evolving landscape of sports betting and prediction markets.