Robinhood's Strategic Bet: Scaling Prediction Markets Through Partnerships, Not Platforms

Robinhood Markets Inc. (HOOD) has emerged as a dominant player in the rapidly expanding prediction markets sector, which now generates $100 million in annualized revenue for the company—surpassing expectations and signaling a pivotal shift in its business strategy. During its Q3 2025 earnings call, CEO Vlad Tenev emphasized the category's explosive growth, noting that October's prediction market revenue alone exceeded the total for the previous quarter. However, despite the segment's potential, Tenev reiterated that Robinhood has no immediate plans to develop its own prediction market platform, opting instead to rely on partnerships with existing exchanges like Kalshi, according to Fortune.

The company's decision to forgo vertical integration reflects a strategic focus on leveraging its 26 million-user base to attract third-party platforms. Robinhood currently takes a cut of every prediction market bet facilitated through its app, a model that has proven lucrative without requiring significant internal development. Tenev argued that the space is poised for increased competition, with "a lot of entrants and exchanges" likely to emerge, making direct investment in a proprietary platform less compelling, Fortune reported. Steve Quirk, Robinhood's Head of Brokerage, echoed this sentiment, stating the current arrangement with Kalshi and rivals like Polymarket is "serving it well".

Robinhood's prediction markets, which allow users to bet on outcomes ranging from elections to sports events, have become a critical growth driver. The segment's success follows a regulatory shift in 2024 that lifted longstanding restrictions on such markets in the U.S. The company reported 2.5 billion prediction market contracts in October 2025, according to PYMNTS, a figure that underscores the category's mainstream appeal. This growth has been particularly fueled by sports betting, which recently became available on the platform amid evolving legal frameworks, Fortune reported.

The prediction markets segment now ranks among Robinhood's fastest-growing revenue streams, joining cryptocurrency trading and expanded banking services as key pillars of its diversification strategy. The company's Q3 results highlighted broader financial strength: third-quarter revenue reached $1.19 billion, exceeding analyst estimates, while net profit for Q2 2025 doubled to $386 million, per Futunn. Robinhood's market capitalization has since surged to $130 billion, propelled by its inclusion in the S&P 500 index in September 2025, according to CoinCentral.

Analysts remain cautiously optimistic. While Zacks Research downgraded its rating to "Hold" in November due to a high price-to-book ratio of 15.39x, the broader consensus among 22 analysts includes 13 "Buy" ratings and an average price target of $142.26, Futunn reported. Compass Point raised its target to $161, citing prediction markets' potential to generate over $200 million in annual revenue, Futunn added. However, technical analysts warn of overbought conditions, with Robinhood's stock trading near $147—close to its 52-week high of $153.86, according to Traders Union.

Robinhood's approach to prediction markets aligns with its broader strategy of expanding its financial ecosystem. The company now offers savings accounts, debit cards, and instant cryptocurrency withdrawals, positioning itself as a one-stop fintech platform. Tenev emphasized the importance of "relentless product velocity," with Q3 marked by rapid feature rollouts, PYMNTS reported. Yet, challenges persist, including regulatory scrutiny across its diverse product lines and competition from traditional banks and fintech startups.

As prediction markets mature, Robinhood's role as a distribution channel rather than a direct competitor may prove decisive. By focusing on scale and user engagement, the company aims to capture a growing segment without diverting resources from its core operations—a strategy that, if sustained, could further solidify its market leadership.