Robinhood Up 12%—Could Prediction Markets Be Its Secret Weapon?

Key Points

• Shares of Robinhood Markets just spiked after the CEO released new data on the company's latest growth driver: prediction markets.
• Along with its partner Kalshi, Robinhood could disrupt the sports betting market, creating a significant long-term opportunity.
• Multiple analysts raised their HOOD price target based on prediction market wins.

Robinhood Markets NASDAQ: HOOD may have just found its next key growth driver.

Shares recently surged due to strength in one of Robinhood’s newest features: prediction markets. Robinhood closed up by more than 12% on On Sept. 29, putting the finance stock’s year-to-date return above 250%.

Meanwhile, sports betting giants DraftKings NASDAQ: DKNG and Flutter Entertainment NYSE: FLUT plummeted on Sept. 30 as markets reacted to Kalshi’s—Robinhood’s prediction markets partner—new sports betting feature.

As this market gains traction, investors are asking: How meaningful is this growth trend, and can it translate into sustainable revenue for Robinhood?

HOOD Event Contracts Are Doubling—and Could Soon Move the Needle

Robinhood CEO Vlad Tenev revealed in a recent social media post that the platform hosted over two billion event contracts in Q3, up from one billion in Q2, a staggering 100% growth quarter-over-quarter. "Event contracts" allow users to wager on real-world outcomes, from Oscar nominations to NFL games.

In its Q2 earnings call, Robinhood noted that event contracts reached $1 billion, which was more than double what it was in Q1. This data clearly positions prediction markets as a substantial new opportunity for Robinhood that can help drive shares higher. Additionally, event contracts might soon impact Robinhood's finances significantly.

While the company currently charges two cents in commissions and fees on event contracts, half goes to Robinhood and half goes to Kalshi. The two billion contracts in Q3 equate to around $20 million in revenue, or $80 million on an annualized basis. That equals around 1.7% of the approximately $4.77 billion in total revenue analysts expect Robinhood to generate over the next 12 months. 

Should volumes keep doubling, prediction markets could exceed 5% of total revenue, a major milestone for a business unit that only launched in Q4 2024. Such growth would not only support higher share prices but could redefine Robinhood’s monetization model beyond traditional brokerage and crypto services.

Kalshi’s Sports Betting Push Could Disrupt DraftKings and Flutter

Robinhood’s upside potential may extend far beyond event contracts. Kalshi recently launched parlay-style NFL bets, which allow users to link multiple wagers into a single, higher-payout bet. These complex bets are a cornerstone of traditional sportsbook profits—often accounting for more than half of sportsbook revenue.

When Kalshi entered this space, DraftKings and Flutter shares immediately dropped, indicating that markets view Kalshi as a legitimate threat. 

According to the American Gaming Association, sportsbooks generated approximately $13.7 billion in revenue in 2024. This was an increase of around 24% from 2023. This highlights the large and growing opportunity that Robinhood has in event contracts longer term if it can take share in this market.

Still, the economics of event contracts may be significantly different from sportsbook wagers. This makes it difficult to determine the size of Robinhood’s total addressable market in this space. However, the point remains that Robinhood is early in its prediction markets push. The offering represents a significant long-term growth driver for revenues and shares.

One important risk is that Kalshi faces a significant number of lawsuits as its platform blurs the line between investing and betting. Kalshi, and Robinhood by extension, could face significant legal challenges down the road that limit prediction markets' growth.

Analysts Boost Price Targets, Long-Term Outlook Strong Despite Valuation

Based on early prediction markets success, analysts at Needham and Piper Sandler significantly upped their Robinhood price targets. The average of their targets comes in at $142.50, essentially equal to the stock’s Sept. 30 closing price.

Overall, Robinhood has an elevated valuation, with most analysts seeing downside potential in the stock.

However, the company’s ability to continue finding new revenue streams makes its long-term outlook promising. Additionally, further prediction markets wins could influence analysts to move their price targets higher.