Distribution is King: Robinhood is Eating the Prediction Market

Original Author: @Decentralisedco

Original Translation: AididiaoJP, Foresight News

In a previous article, we explored how HIP-4 brings structured products to Hyperliquid. Robinhood has a similar operation, achieved through its recent foray into prediction markets; the table below provides some context.

Fidelity, Schwab, and Interactive Brokers grew up in an era before prediction markets existed. Even spot cryptocurrency represents only a small fraction of their overall product suite. In contrast, Robinhood caters to a younger demographic who might want to bet on sporting events, go long on semiconductor stocks, actively trade Solana, while simultaneously holding crude oil positions in the futures market. A generation of users who grew up "monitoring the situation" will flock to platforms like Polymarket or Kalshi if Robinhood cannot offer the same risky assets.

One way to mitigate this risk is to offer event contracts. These are binary instruments that settle on a "Yes" or "No" outcome. Each contract is priced between $0 and $1, reflecting the market's real-time probability of an event occurring. If you're correct, the contract settles at $1; if wrong, it's $0. The user's entry cost is the probability of the event. For example, a contract priced at $0.60 for the Strait of Hormuz being open by May 30th signals the market's belief. If most people are convinced something will happen, there is little room for profit from that event.

On Robinhood, these instruments can serve as hedging tools. You could go long on the Strait of Hormuz being open while going long on crude oil prices, assuming that if the strait isn't open, oil prices will remain high.

Robinhood first launched its prediction market business in March 2025, routing clients through KalshiEX. In nine months, users traded 12 billion contracts. About 70% of that full-year volume was concentrated in the fourth quarter. In Q1 2026, Robinhood has already recorded 8.8 billion event contracts.

Over 1 million Robinhood customers traded event contracts in 2025. Instead of launching these markets and building liquidity itself, Robinhood directly integrated Kalshi's prediction markets. Robinhood acts as the distribution layer by providing a dashboard for its clients. The entire infrastructure, at least for now, is still powered by Kalshi (more on this later).

Kalshi and Polymarket dominate the market, accounting for over 90% of total prediction market volume. Robinhood distributes Kalshi's contracts to its 27.4 million funded users, who invest across multiple asset classes like stocks, cryptocurrencies, futures, and options. Kalshi is just a prediction market platform and cannot match this distribution power.

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

While Coinbase allows users to trade stocks, cryptocurrencies, futures, and options (through its Deribit acquisition), it only launched prediction markets this January. In contrast, Robinhood's prediction market business has been operational for over a year, with an annualized revenue exceeding $415 million. Robinhood also has significantly more monthly active users than Coinbase, at 13.5 million compared to Coinbase's 9.2 million.

Prediction markets can evolve further on Robinhood. Currently, they are a separate hub within the app, somewhat disconnected from the rest of the platform. But soon, they can be cross-linked with assets like stocks, options, and cryptocurrencies – Robinhood stock traders could directly purchase prediction market event contracts.

Imagine opening Nvidia's stock page just before its earnings report. You see the usual information: stock price and options chain. But now, you also see an event contract next to it: "Will Nvidia exceed Q2 revenue expectations?" The contract is trading at $0.72, implying the market sees a 72% probability of it beating expectations. You believe the market is underestimating demand for Nvidia's products.

In this scenario, Robinhood lets you buy the stock, buy a call option, or purchase 500 "Yes" contracts for $360 – yielding a potential $140 profit if you're correct ($0.28 profit per contract × 500 contracts).

Robinhood puts these three instruments on the same screen, no tab switching required.

As illustrated earlier with the crude oil example, you can also use these tools to hedge positions. You could bet on Nvidia beating expectations while shorting the stock to hedge your prediction market wager. Thus, Robinhood allows you to construct a cross-asset hedging strategy on the same screen in under a minute.

So far, this integration on the stock trading page has worked well for Robinhood, but it's still leaving money on the table. This will change soon, as Robinhood is about to take the next step.

A Richer Context for Information Pricing

Robinhood's moat lies in providing users with all relevant information exactly when and where they need it most. The era of buying Bitcoin on Coinbase, trading options on Deribit, holding stocks on Robinhood, and trading crude oil futures with IBKR is over. Users want to avoid switching contexts and platforms.

Once Robinhood embeds prediction markets into all asset pages, it transforms from a passive broker into an information pricing platform. Beyond price and analyst ratings, Robinhood will offer a real-time probability market for events related to that stock. Event contracts reflect the live consensus of participants with real money at stake. These contracts can help users make better decisions, even if they never trade a single prediction market contract.

Take Nvidia again. The stock price at any given moment reflects the sentiment of those holding the underlying equity. Accompanying equity are legal rights, shareholder reports, analyst Q&A sessions, and a framework for investor protection built over 400 years. But most of the time, traders may not care about all that. The information they want to price might be "Will Nvidia beat revenue expectations?" In this case, prediction markets can arguably be a better source of information pricing than the stock price itself. Robinhood's attempt to bring all instruments – derivatives, event contracts, and equities – under one roof precisely aims to capture value from all users who might want to trade that event.

But Polymarket and Kalshi have been doing this for years, so where is Robinhood's moat? Why not just integrate third-party markets into its interface to increase revenue, instead of owning these markets itself? Cross-selling and volume provide a clearer picture of the incentives.

Cross-Selling as a Regulatory Moat

In March 2026, two bipartisan bills were proposed aiming to ban sports-related event contracts at the federal level. There are also legal hurdles at the state level. This is an existential crisis for platforms like Kalshi – 89% of its fee revenue in 2025 came from sports-related event contracts. Approximately 60% of Polymarket's open interest also comes from sports-related event contracts.

If sports contracts face legal setbacks, Kalshi and Polymarket would be hit hardest. Without this dominant category, they cannot support valuations exceeding $20 billion. While 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 jobs reports).

For Robinhood, sports are just one revenue stream. For Kalshi, the sports category is almost everything. Any regulatory crackdown on sports-related markets could impact Kalshi and Polymarket's claims to valuations over $20 billion. Robinhood is now moving higher up the value chain through a joint venture named Rothera.

In November 2025, Robinhood established a joint venture called Rothera LLC. This joint venture subsequently acquired MIAXdx – a CFTC-regulated Designated Contract Market (DCM), Derivatives Clearing Organization (DCO), and Swap Execution Facility (SEF). This fundamentally changes the economics, control, ownership, and clearing and settlement processes of event contracts.

Relying on Kalshi to provide event markets limited the types of contracts Robinhood could list on its prediction market. Rothera allows Robinhood to list any event contract at any time.

Economically, this could mean Robinhood captures the penny currently going to Kalshi, potentially doubling event contract revenue. If Robinhood can funnel half of this revenue into its own entity, its prediction market revenue could increase by 50% at current event contract rates, reaching $620 million.

There is reason for optimism about this joint venture, as its latest quarterly results revealed Robinhood has started investing in Rothera. Q1 2026 results included $14 million in joint venture-related costs. There's a small additional benefit here: once prediction market contracts are routed through Rothera, the collateral backing open positions will sit on Robinhood's balance sheet, adding interest income to its revenue. With open interest corresponding to collateral size around $100 million, this could generate an additional $4-5 million in annual revenue.

Every trading platform has a simple mission: get traders to move money as frequently as possible and take a small cut on each trade; or have them park large amounts of idle capital and keep the interest income. For Robinhood, it seems the latter strategy is being employed.

Robinhood's cross-selling moat through prediction markets is similar to the moat we previously identified for Hyperliquid with its HIP-4 event contracts. Hyperliquid's unified risk engine integrates primitives like spot, perpetuals, deployment markets, and prediction markets, ensuring capital efficiency in a decentralized market. The same logic applies to Robinhood, but within centralized markets.

Kalshi lacks Robinhood's distribution moat across different asset classes. A standalone prediction market product is far less valuable than a prediction market embedded within all other trading products. Coinbase has just dipped its toes into prediction markets, while Robinhood's full-asset stack integrated with event contracts on a single screen gives it a head start over Coinbase in the prediction market space.

By the Numbers

Any valuation discussion comparing Coinbase, Kalshi, and Robinhood is essentially trying to answer the same question: what is the lifetime value of a user on each platform? Kalshi likely has fewer users, but they pay significantly higher fees. The same user, if Robinhood can match Kalshi's liquidity at lower fees, would trade entirely on Robinhood.

The market sees this difference. Kalshi and Robinhood trade at similar valuation multiples (15x), while Coinbase trades at a lower multiple of 7.5x. For Kalshi, prediction markets constitute 100% of its revenue. For Robinhood, it's just 7%. For Coinbase, the number is negligible.

Once Rothera goes live, Robinhood can price more competitively than any standalone prediction market platform. It can undercut Kalshi's fees, absorb the margin hit, and still grow because every prediction market user is also a potential customer for stocks, options, and crypto. Kalshi hasn't remained silent, reportedly planning to launch cryptocurrency trading, starting with perpetuals. But transitioning from a prediction market to a multi-asset platform is much harder than integrating prediction markets into an existing multi-asset trading platform.

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

One way to understand the business's value is to hypothetically spin off Robinhood's prediction market business and list it independently. If it has $415 million ARR and the same growth trajectory, how much would it be worth? The simplest answer is Kalshi's 15x multiple, giving a $6.2 billion valuation. But all else being equal, a Kalshi with Robinhood's revenue line would command a much higher valuation.

We built a projection model for the next three years using the following assumptions:

• Contract Volume: Base case of 70 billion event contracts in 2028. This assumes a CAGR of about 40% over the next two years, based on Robinhood already recording 8.8 billion in Q1 this year (annualized ~35 billion).
• Rothera Economics: We expect effective revenue per contract to rise from $0.01 to $0.015 in a bear case, or $0.02 in the base/bull case (after three years).
• Cross-Sell Lift: Multiplier of 1.0x in 2026 (cross-linking not yet live), 1.1x in 2027 (initial stock page integration), 1.2x in 2028 (mature adoption). This assumes cross-selling adds 10-20% incremental volume on top of organic prediction market growth.
• Robinhood Total Revenue: Using consensus estimates of $5.4B in 2026, $6.4B in 2027, and $7.2B in 2028.

We then stress-tested the 2028 projections under Bear, Base, and Bull scenarios.

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

What we are likely witnessing is: a business with a distribution moat pioneering an entirely new market and capturing most of the value for itself. The lingering question is whether Polymarket and Kalshi will be a repeat of OpenSea in 2021, or whether they can successfully reinvent themselves as new threats emerge. Polymarket has expanded its perpetuals offering in recent days, but its users are unlikely to pivot to perpetual trading given their original intention was prediction markets. In contrast, Robinhood benefits from a core user base that originally came for its high-risk, zero-fee trading instruments. The latter seems to have a stronger advantage.

Today, the market views Robinhood as a traditional finance broker with an added prediction market offering – hence prediction markets only account for 7% of its revenue. But if Robinhood CEO Vladimir Tenev delivers on his stated direction, Robinhood will become the platform that prices every financial opinion on earnings, interest rates, elections, and commodities in real-time while simultaneously offering trading in the assets driven by those opinions.

A standalone prediction market only attracts people already trading event contracts. In contrast, a prediction market integrated into a retail broker becomes an information pricing machine for everyone else. The vertical integration of capital aggregators is everywhere.