Robinhood's Prediction Markets Pull In $173M, Blowing Past Crypto Revenue

Robinhood dropped its third-quarter numbers after the closing bell on Oct. 27, and the report landed with a thud. Adjusted earnings came in at $0.51 per share on $1.42 billion in sales, short of the $0.56 and $1.43 billion analysts were looking for. Revenue still climbed 12% year over year to a record, but earnings per share slipped 3% from a year earlier. The stock has taken a beating, recently trading at $78.39, down 10.32%.

The headline act, though, is prediction markets. Revenue from event contracts ripped more than sixfold higher annually to $173 million — a bright spot big enough to paper over trouble elsewhere. The crypto segment, once Robinhood's growth darling, saw sales tumble 55% year over year, landing at $120 million. In other words, betting on elections, sports and the weather now pays better than trading dogecoin.

The category is exploding. Kalshi and Polymarket have built out huge user bases and billion-dollar valuations, and event contracts let people buy and sell positions on real-world outcomes much like they'd trade stocks. Robinhood's growth in the space has been so steep that the business looks poised to clear a $1 billion annual revenue run rate before long, according to fool.com.

That would be a serious cushion. With crypto cooling off hard, prediction markets are smoothing out Robinhood's overall revenue and keeping the growth curve pointed up. The bear case is regulatory: the sector is still in its Wild West phase, and a wave of new rules could slow growth, raise costs or even saddle operators with hefty fines down the line.

Regulators may find it tough to stuff the toothpaste back in the tube now that event contracts have gone mainstream. But investors should know the disruption risk is real. Prediction markets have been an undeniable boost to Robinhood's top and bottom lines — the question is whether they can carry the stock from here.