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FollowingRobinhood's business focus quietly shifts: Forecasting the market becomes the core profit engine
Robinhood is undergoing a silent but profound transformation on its platform, and its real source of profit is gradually shifting. According to Robinhood's latest financial data, it earned US$156 million in revenue in the second quarter through contracts predicting market events, which not only exceeded the US$129 million in revenue from stock trading, but also higher than the US$100 million in revenue generated by cryptocurrency trading.
This confirms the view widely shared by StockMKTNewz this weekend: Robinhood currently earns more revenue from customer trading in the prediction market than from stock trading.
More importantly for investors, Wall Street began to view this shift as a structural change that was more lasting than a temporary speculative boom.
Event contract trading volume surged more than tenfold
In the second quarter, Robinhood users traded 13.6 billion event contracts, a more than tenfold increase from 1 billion a year ago. During the same period, revenue from the forecast market surged from $10 million to $156 million. Currently, this category has become Robinhood's second-largest source of trading revenue, after options (options revenue for the quarter was $342 million).
This momentum continued after the quarter ended. In July, event contract trading volume reached 6.1 billion, about 20 times the level of the same period last year. In contrast, Robinhood's cryptocurrency trading volume fell 62% year-on-year to US$10.9 billion. This divergence suggests that as cryptocurrency activity slows, speculative retail activity has not disappeared, but may have migrated to the prediction market.
We have tracked similar transition periods before, when the market was forecast to overtake cryptocurrencies, and Robinhood's record-breaking second-quarter earnings report also revealed the scale of event contract growth.
The Rothera platform is expected to further optimize economic efficiency
Robinhood is reducing its reliance on third-party forecasting market infrastructure. In June, the company established Rothera, an exchange and clearing house licensed by the Commodity Futures Trading Commission (CFTC), through a joint venture with Susquehanna International Group. During the second quarter, Rothera processed 2.1 billion contracts and contributed $17 million of total revenue from Robinhood incident contracts of $156 million.
Although Robinhood still distributes contracts from other venues, it owns a portion of the underlying exchange, making it more than just acting as a client-facing broker, potentially receiving better financial returns. This is increasingly attracting Wall Street's attention.
This week, Morgan Stanley analyst Michael Cyprys upgraded his HOOD rating to "Overweight" and raised his price target from $124 to $150. He believes Robinhood's expanding business is improving user engagement and monetization capabilities beyond cryptocurrency transactions.
Affected by the news, HOOD shares surged 16.6% to US$124.72 on Thursday, before falling back about 2.1% on Friday.
Regulatory issues remain. Coinpaper's report on the evolving CFTC framework shows that sports and political contracts remain closely watched. However, Robinhood's latest data reveals a fact that cannot be ignored: The prediction market has rapidly evolved from an experimental function to one of the largest revenue businesses of brokerages, far faster than Wall Street originally expected.
