Robinhood's Prediction Market Bet Pays Off: Time to Buy HOOD?

Robinhood disclosed that customers traded about 5.9 billion event contracts in October, up 5% from September and a staggering 136% from a year earlier. The stock rose 4% on the news. These contracts are simple yes-or-no bets on real-world outcomes, like who wins a game, and most of the action is in sports.

In the third quarter, customers traded a record 16.4 billion event contracts, more than seven times the year before. Revenue from these contracts soared more than sixfold to $173 million, now accounting for about 12% of Robinhood's $1.42 billion in quarterly revenue. That's larger than what the company earned from crypto trading ($120 million, down 55%) or stock trading ($121 million).

Robinhood is also building the market infrastructure itself. Through Rothera, a joint venture with Susquehanna International Group, it owns 90% of a federally licensed exchange that offers prediction markets. Rothera reached over $100 million in annualized revenue in its first full quarter. This means Robinhood can earn twice on the same contract: as the app customers use and as the venue where it's listed.

The rest of the business looks healthy, too. In October, customers deposited about $15 billion in net new money, and trading in stocks and options held steady. The October volume was above the third quarter's monthly average, putting the fourth quarter on pace to top the third if the trend holds.

The rapid growth of event contracts is reshaping Robinhood's revenue mix. In the third quarter, prediction markets brought in more revenue than either crypto or stock trading, and only options trading brought in more among its trading businesses. This diversification reduces reliance on any single hot trend, which is crucial for a company tied to retail trading sentiment.

The math on October is encouraging. Robinhood earned roughly 1 cent per event contract in the third quarter. At that rate, October's 5.9 billion contracts would be worth about $60 million in a single month. If this pace continues, the fourth quarter could see event-contract revenue exceed $180 million, further boosting overall results.

However, the biggest risk is legal. Several states, including Nevada, New Jersey, and Massachusetts, argue that event contracts on sports are gambling and should fall under state gaming laws. Robinhood has sued those states to block enforcement, but it warns that lawsuits or new laws could immediately prevent it from offering event contracts. A court loss or a state crackdown could quickly cut off one of its fastest-growing businesses.

Despite the legal overhang, the stock has had a rough year, down about 29% in 2026 and some 45% below its highs last year. At about $82 per share, Robinhood is worth roughly $74 billion. For investors who can stomach volatility, the pullback appears to be a reasonable entry point, given the company's multiple growing businesses including prediction markets, its Gold subscription service, and government-backed Trump Accounts for children.