Distribution is King: Robinhood is Consuming the Prediction Market

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Original author: @Decentralisedco

Original translation: AididiaoJP, Foresight News

In a previous article, we discussed how HIP-4 brings structured products to Hyperliquid. Robinhood has a similar operation, achieved through recent ventures into prediction markets; the following table provides some background.

Fidelity, Schwab, and Interactive Brokers grew up in an era before prediction markets existed. Even in spot crypto, they only represent a small part of their overall offerings. In contrast, Robinhood serves a younger demographic, who may want to bet on sports events, go long semiconductor stocks, trade Solana frequently, and hold oil positions in futures markets. A generation raised on “monitoring the situation” would flock to platforms like Polymarket or Kalshi if Robinhood cannot offer similar risk assets.

One way to mitigate this risk is by offering event contracts. These are binary tools settled on “yes” or “no” outcomes. Each contract’s price ranges from $0 to $1, reflecting the market’s real-time probability of the event occurring. If you’re correct, the contract settles at $1; if wrong, at $0. The cost to enter is the perceived probability of the event. For example, a $0.60 Holocene Strait contract open before May 30 signals the market’s belief in its likelihood. If most believe something will happen, the profit margin from that event shrinks.

On Robinhood, these tools can serve as hedging instruments. You might go long on the Holocene Strait opening while also going long on oil prices, assuming that if the strait doesn’t open, oil prices will stay high.

Robinhood first launched its prediction market business in March 2025, routing through KalshiEX. Within nine months, users traded 12 billion contracts. About 70% of the annual trading volume was concentrated in Q4. By Q1 2026, Robinhood had recorded 8.8 billion event contracts.

In 2025, over 1 million Robinhood customers traded event contracts. Robinhood did not create these markets or build liquidity itself but integrated Kalshi’s prediction markets directly. Robinhood acts as a distribution layer by providing dashboards for its customers. The entire infrastructure is still supported at least for now by Kalshi (more details later).

Kalshi and Polymarket dominate the market, accounting for over 90% of total prediction market trading volume. Robinhood distributes Kalshi’s contracts to its 27.4 million paying users, who invest across stocks, crypto, futures, options, and other asset classes. Kalshi is just a prediction market platform and cannot match this distribution capability.

In fact, Robinhood contributed 50% of Kalshi’s trading volume in its first year.

While Coinbase allows users to trade stocks, cryptocurrencies, futures, and options (via its acquisition of Deribit), it only launched prediction markets in January this year. In contrast, Robinhood’s prediction market business has been operating for over a year, with annualized revenue exceeding $415 million. Robinhood’s monthly active users also far surpass Coinbase’s, reaching 13.5 million compared to Coinbase’s 9.2 million.

Prediction markets can further evolve on Robinhood. Currently, they are a separate hub within the app, disconnected from other parts of the platform. But soon, they could be cross-linked with stocks, options, and cryptocurrencies—allowing Robinhood’s stock traders to directly purchase prediction market event contracts.

Imagine opening Nvidia’s stock page before its earnings report. You see the usual info: stock price and options chain. But now, there’s also an event contract: “Will Nvidia beat Q2 revenue expectations?” The contract trades at $0.72, implying a 72% market probability of exceeding expectations. You believe the market is underestimating demand for Nvidia’s products.

In this case, Robinhood lets you buy stocks, buy call options, or purchase 500 “Yes” contracts at $360 each—if correct, you could earn $140 (profit of $0.28 per contract × 500).

Robinhood places these three tools on the same screen, no switching tabs needed.

As with the oil example earlier, you can hedge your position using these tools. You might bet Nvidia will beat expectations while shorting the stock to hedge your prediction market bet. Robinhood thus enables you to build cross-asset hedging strategies in under a minute, all on one screen.

So far, this integration on the stock trading page has worked well for Robinhood, but it’s leaving money on the table. That will soon change, as Robinhood prepares for its next move.

More Contextualized Pricing of Information

Robinhood’s moat lies in providing all relevant information at the time and place users need it most. The era of buying Bitcoin on Coinbase, trading options on Deribit, holding stocks on Robinhood, and trading oil futures via IBKR is over. Users want to avoid switching contexts and platforms.

Once Robinhood embeds prediction markets into all asset pages, it shifts from a passive broker to an information-pricing platform. Beyond prices and analyst ratings, Robinhood will offer real-time probability markets for relevant events related to each stock. These event contracts reflect the real-time consensus of participants with real money involved. They help users make better decisions—even if they’ve never traded a prediction market contract before.

Take Nvidia again. The stock price at any moment reflects the sentiment of current shareholders. Along with equity rights, there are shareholder reports, analyst questions, and a framework built over 400 years to protect investors. But most traders may not care about these details. They want to price the question: “Will Nvidia beat revenue expectations?” In this case, prediction markets (arguably) could be a better source of pricing information than the stock price. Robinhood’s attempt to integrate derivatives, event contracts, and equities under one roof aims to capture value from all users interested in trading that event.

But Polymarket and Kalshi have been doing this for years. Where is Robinhood’s moat? Why not simply integrate third-party markets into its own interface to increase revenue, rather than owning these markets itself? Cross-selling and trading volume more clearly demonstrate incentives.

Cross-selling as a Regulatory Moat

In March 2026, two bipartisan bills were introduced to ban federal-level sports-related event contracts. State-level legal barriers also exist. This poses a survival threat to platforms like Kalshi—whose 2025 89% fee revenue came from sports-related event contracts. About 60% of Polymarket’s open interest also comes from sports-related contracts.

If sports contracts face legal setbacks, Kalshi and Polymarket will be hit hardest. Without this dominant category, they cannot sustain valuations over $20 billion. Although Robinhood initially started with a heavy focus on sports markets, its cross-selling ability allows it to diversify revenue into stocks and macro events (like earnings reports, Fed decisions, CPI data, and employment reports).

For Robinhood, sports is just one revenue stream. For Kalshi, sports nearly define everything. Any regulatory crackdown on sports-related markets could threaten Kalshi and Polymarket’s valuation above $20 billion. Robinhood now holds a higher position in its value chain through a joint venture called Rothera.

In November 2025, Robinhood established a joint venture called Rothera LLC. This company then acquired MIAXdx—a CFTC-licensed designated contract market (DCM), derivatives clearing organization (DCO), and swap execution facility (SEF). This radically changes the economics, control, ownership, and clearing/settlement processes of event contracts.

Relying on Kalshi to provide event markets limits Robinhood’s ability to list contracts on its prediction markets. Rothera allows Robinhood to list any event contract at any time.

From an economic perspective, this could mean Robinhood captures the current dollar paid to Kalshi and doubles event contract revenue. If Robinhood can funnel half of that revenue into its own entity, its prediction market revenue could increase by 50%, reaching $620 million.

There’s reason to be optimistic about this joint venture, as its latest quarterly results disclosed Robinhood’s beginning to invest in Rothera. Q1 2026 results included $14 million in joint venture-related costs. Another small benefit: once prediction market contracts route through Rothera, collateral backing open positions will be recorded on Robinhood’s balance sheet, adding interest income. When the open interest collateral reaches about $100 million, this could generate an additional $4-5 million annually.

Every trading platform has a simple mission: to get traders to move funds as frequently as possible and earn small fees per trade; or to keep large idle capital and earn interest income. For Robinhood, it seems to be the latter.

The cross-selling moat enabled by prediction markets, similar to what we previously thought Hyperliquid’s HIP-4 event contracts would offer, is a key advantage. Hyperliquid’s unified risk engine integrates spot, perpetuals, deployment markets, and prediction markets, ensuring capital efficiency in decentralized markets. The same logic applies to Robinhood, but within a centralized market.

Kalshi lacks Robinhood’s cross-asset distribution moat. A pure prediction market product is worth far less than prediction markets embedded within all other trading products. Coinbase just entered prediction markets, but Robinhood’s full asset stack and integrated event contracts give it a lead over Coinbase in the prediction market space.

Numbers Speak

When discussing valuation with Coinbase, Kalshi, and Robinhood together, the question is always: what is the lifetime value of a user on each platform? Kalshi’s users may be fewer, but they pay much higher fees. The same user, if Robinhood can match Kalshi’s liquidity at lower costs, will trade entirely on Robinhood.

The market already sees this difference. Kalshi and Robinhood have similar valuation multiples (both at 15x), while Coinbase’s multiple is lower at 7.5x. For Kalshi, prediction markets account for all revenue. For Robinhood, it’s only 7%. For Coinbase, this figure is negligible.

Once Rothera launches, Robinhood can price more competitively than any standalone prediction market platform. It can undercut Kalshi’s fees, absorb profit margins, but still grow, because each prediction market user could also be a potential stock, options, and crypto customer. Kalshi is not silent; it’s reportedly planning to launch crypto trading, starting with perpetuals. But transitioning from prediction markets to a multi-asset platform is much harder than simply integrating prediction markets into a multi-asset trading platform.

Robinhood has spent over a decade acquiring 27.4 million paid users and building deep liquidity, market maker, compliance infrastructure, and user trust. Kalshi will have to start from scratch.

One way to understand the value of this business is to spin off Robinhood’s prediction market business and list it independently. If it has $415 million ARR and the same growth trajectory, what would it be worth? The simplest answer is 15x Kalshi’s multiple, or $6.2 billion. But under similar conditions, owning Robinhood’s revenue stream would make Kalshi’s valuation much higher.

We built a future three-year valuation model based on the following assumptions:

Contract volume: 2028 baseline scenario at 70 billion event contracts, assuming a ~40% CAGR over the next two years. Based on Robinhood’s first-quarter record of 8.8 billion (annualized about 35B).

Rothera economics: We expect effective revenue per contract to rise from $0.01 to $0.015 in a bear market scenario, or $0.02 in baseline/bull scenarios (after three years).

Cross-sell uplift: 2026 multiplier 1.0x (no cross-linking yet), 2027 1.1x (initial stock page rollout), 2028 1.2x (mature adoption). This assumes cross-selling adds 10-20% incremental trading volume based on organic prediction market growth.

Robinhood total revenue: Using consensus estimates, $5.4 billion in 2026, $6.4 billion in 2027, and $7.2 billion in 2028.

We then stress-tested 2028 under bear, baseline, and bull scenarios.

Even in a bear scenario, Robinhood’s prediction market revenue in 2028 would reach $825 million—more than three times Kalshi’s 2025 revenue ($260 million). Using Kalshi’s current valuation multiple (15x), Robinhood’s prediction market business would be worth $12 billion in this scenario. In the most optimistic case, it could be worth $30 billion by 2028.

What we’re likely to see: a company with a distribution moat expanding into a new market, capturing most of the value for itself. The open question remains whether Polymarket and Kalshi are a replay of OpenSea in 2021 or can successfully reinvent themselves when new threats emerge. Polymarket recently expanded into perpetuals, but its users are unlikely to switch just because prediction markets are not their primary interest. Robinhood, on the other hand, benefits from a core user base that has always traded its high-risk, zero-fee tools. The latter seems to have a competitive advantage.

Today, the market views Robinhood as a traditional financial broker plus a prediction market product, which is why prediction markets account for only 7% of its revenue. But if Robinhood CEO Vladimir Tenev executes on his stated vision, Robinhood will become a platform that: prices real-time financial opinions on earnings, interest rates, elections, and commodities, while also providing trading services for the assets driven by those opinions.

A standalone prediction market would only attract those already trading event contracts. In contrast, an integrated prediction market within a retail broker becomes an information-pricing machine for everyone else. The vertical integration of capital aggregators is evident everywhere.