Robinhood's Prediction Market Bet Is Paying Off. Is the Stock a Buy?
Key Points
Robinhood said event-contract trading rose 136% from a year earlier in October, to about 5.9 billion contracts.
In the third quarter, event contracts brought in $173 million, more than six times the year before and more than Robinhood earned from crypto or stock trading.
The stock is down about 24% this year, and several states argue the contracts amount to illegal sports betting.
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Robinhood Markets (NASDAQ:HOOD) built its name on commission-free stock trading, but its fastest-growing business today is now something else entirely.
On Wednesday, Robinhood disclosed that its customers traded about 5.9 billion event contracts in October, up 5% from September and up 136% from a year earlier. The stock rose about 4% by market close.
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What Event Contracts Are
Event contracts are simple yes-or-no bets on real-world outcomes, like who wins a game. Each contract trades between 1 cent and $1 and pays $1 if you're right.
Most of the action is in sports. In its latest quarterly report, Robinhood said the growth came "predominantly in sports-related event contracts."
The Business Is Getting Big
The October numbers continue a sharp run. In the third quarter, customers traded a record 16.4 billion event contracts, more than seven times the year before. Revenue from them rose more than sixfold to $173 million.
That's now about 12% of Robinhood's $1.42 billion in quarterly revenue. And it's larger than what the company earned from crypto trading ($120 million, down 55%) or stock trading ($121 million). Only options trading, at $399 million, brought in more among Robinhood's trading businesses.
The math on October is encouraging. Robinhood earned roughly 1 cent per event contract in the third quarter ($173 million divided by 16.4 billion contracts). At that rate, October's 5.9 billion contracts would be worth about $60 million in a single month. October's volume was also above the third quarter's monthly average of about 5.5 billion, so the fourth quarter is on pace to top the third if the trend holds.
Robinhood is also building the market itself, not just the app. Rothera, a joint venture with trading firm Susquehanna International Group, owns 90% of a federally licensed exchange that offers prediction markets. Rothera reached more than $100 million in annualized revenue in its first full quarter. Owning the exchange means Robinhood can earn twice on the same contract: once as the app customers use to place the trade, and again 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 Risks Are Real
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, and it warns that lawsuits or new laws "could immediately or subsequently prevent us from offering, or continuing to offer, event contracts."
There's also competition from other prediction-market platforms, and a heavy reliance on sports. And Robinhood remains tied to the mood of retail traders. Its crypto revenue fell by more than half last quarter as crypto prices slumped, a reminder of how quickly a hot business can cool.
Is Robinhood Stock a Buy?
The stock has had a rough year. Even after Wednesday's gain, it's 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 live with volatility, the pullback appears to be a reasonable entry point. Robinhood now has several growing businesses, including prediction markets, its Gold subscription service, and the government-backed Trump Accounts for children, rather than relying on one hot trend. Its record $1.42 billion quarter shows that the diversification is working.
But this isn't a stock for the faint of heart. A court loss or a state crackdown could quickly cut off one of its fastest-growing businesses. Investors who buy should keep the position modest and watch two things: whether event-contract volumes continue to climb, and how the legal fight with the states plays out. For those looking at financial stocks with more growth than a typical bank or broker, Robinhood deserves a spot on the watch list.
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*Stock Advisor returns as of November 12, 2026.
Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool recommends Robinhood Markets. The Motley Fool has a disclosure policy.
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