Robinhood's prediction market shows strong growth potential
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 05 2024
0mins
Should l Buy HOOD?
Robinhood Markets Inc. saw a significant price drop of 5.05% in pre-market trading, crossing below its 5-day SMA. This decline comes amid a broader market downturn, with the Nasdaq-100 down 1.74% and the S&P 500 down 1.33%.
Despite the price drop, Robinhood's prediction market has emerged as the fastest-growing product in the company's history, with 12 billion event contracts traded in Q4, projecting an annual revenue of $435 million. This growth indicates strong market demand and long-term potential, even as the company faces challenges in shifting to a relationship-driven platform.
The implications of this growth are significant for Robinhood, as it seeks to diversify its revenue streams and deepen user relationships. The success of the prediction market could help the company stabilize its financial performance and enhance its position in the competitive fintech landscape.
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Analyst Views on HOOD
Wall Street analysts forecast HOOD stock price to rise
20 Analyst Rating
16 Buy
4 Hold
0 Sell
Strong Buy
Current: 77.090
Low
130.00
Averages
156.24
High
181.00
Current: 77.090
Low
130.00
Averages
156.24
High
181.00
About HOOD
Robinhood Markets, Inc. is creating a financial services platform for everyone, regardless of their wealth, income, or background. It uses technology to provide access to the financial system. Its offerings include Brokerage, Robinhood Crypto, Custody, Robinhood Wallet, Robinhood Gold, and Robinhood Gold Card. Its Brokerage services include investing, options trading, fractional trading, recurring investment, access to investing on margin, fully paid securities lending, cash sweep, instant withdrawals, Robinhood retirement, 24-hour market, joint investing accounts, and event contracts. It also offers a variety of ways for its customers to grow their financial knowledge, including Robinhood Learn, In-App Education, Newsfeeds, Sherwood Snacks, and Crypto Learn and Earn. Its self-clearing system, order routing system, data platform, and other back-end infrastructure deliver the capabilities that allow its customers to focus on investing, saving and spending.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Five Reasons to Buy Robinhood Despite Stock Decline
- Customer Base Expansion: Robinhood's commission-free trading and gamified app have attracted many younger investors, with annual revenue quadrupling from $959 million to $4.5 billion between 2020 and 2025, while the number of funded customers doubled from 12.5 million to 27 million, indicating strong market appeal and growth potential.
- Fintech Ecosystem Growth: Since its IPO, Robinhood has expanded its ecosystem with crypto trading, options trading, and banking services, acquiring nearly a dozen companies to support this expansion, and is likely to continue acquiring to reduce dependence on core brokerage services.
- Regulatory Headwinds Diminishing: Under the Trump administration, the SEC withdrew proposed restrictions on the payment for order flow model and adopted a friendlier stance toward cryptocurrencies, providing a favorable environment for Robinhood and other online exchanges while reducing regulatory risks.
- Profitability Surge: Robinhood returned to profitability in 2024, with EPS rising 31% in 2025, driven by higher interest rates and increased trading fees, while adjusted EBITDA margins improved from 16% in 2020 to 56% in 2025, reflecting enhanced financial discipline and ongoing growth potential.
See More
Investment Firms File for Prediction Market ETFs
- New ETF Trend: Three investment firms have filed with the SEC for prediction market ETFs, which will be based on event contracts tied to upcoming U.S. elections rather than traditional securities, indicating strong market demand for innovative financial products.
- Investment Risk Warning: These ETFs will operate on an all-or-nothing betting model, meaning investors could face significant losses, especially if election outcomes do not meet expectations, potentially resulting in total loss of capital.
- Market Structure Analysis: Unlike traditional ETFs, these prediction market ETFs will not hold any securities, preventing investors from gaining direct exposure to early movers like Robinhood or platforms like Kalshi and Polymarket, thus limiting investment diversity.
- Unsuitable for Long-Term Investment: Due to the structure and risk characteristics of these ETFs, analysts generally believe they are not suitable for long-term buy-and-hold investors, potentially leading to significant disappointment for those chasing short-term market trends.
See More
Regulatory Controversy Between Prediction Markets and Gambling
- Regulatory Challenges: Former New Jersey Governor Chris Christie warns that prediction market platforms may face lawsuits from all 50 states, highlighting the regulatory scrutiny over the blurred lines between prediction markets and gambling, which could hinder industry growth.
- Market Growth: Robinhood CEO Vlad Tenev states that prediction markets represent the fastest-growing business in the company's history, with over 12 billion event contracts traded in 2025 and more than 4 billion in January 2026 alone, indicating strong market demand and potential profitability.
- Leverage Potential: Tenev flagged leverage as the missing piece in prediction markets, which is currently not permissible; however, if regulatory clarity is achieved, it could attract more traders and enhance capital efficiency, akin to how options markets operate.
- Product Integration: Tenev plans to integrate prediction markets directly into the Robinhood platform, allowing users to see related event contracts when viewing specific stocks, which will enhance user experience and potentially increase trading volume.
See More
Prediction Markets Face Regulatory Pressure Amid Controversy
- Market Withdrawals: Polymarket recently archived markets related to nuclear detonations after users placed hundreds of millions in bets, reflecting significant backlash against sensitive topics that could impact its user base and market reputation.
- Rising Regulatory Calls: U.S. lawmakers proposed a bill to restrict markets tied to military actions, regime changes, or deaths, aiming to prevent these markets from incentivizing conflict or exploiting classified information, which could alter the operational landscape of prediction markets.
- Insider Trading Concerns: Legislators expressed worries about insider trading and corruption in prediction markets, accusing Kalshi and Polymarket of allowing trades based on non-public information, potentially undermining market fairness and investor confidence.
- Challenges to Innovation: The CEO of Polymarket noted that despite facing criticism, prediction markets serve a vital informational function, yet the industry's innovation and disruption are met with resistance from traditional regulatory frameworks, which may affect future growth trajectories.
See More
Cathie Wood's Ark Invest Bets on Robinhood and Roku
- Robinhood Growth Potential: In 2025, Robinhood achieved a 52% year-over-year revenue increase to $4.5 billion, with net income rising 33% to $1.9 billion, demonstrating its ongoing efforts in democratizing finance and market appeal.
- Service Diversification: Robinhood is expanding its Gold premium service and launching tax-filing services for high-net-worth users, which not only creates stable revenue streams but also enhances its appeal among younger investors, expected to drive growth over the next decade.
- Roku Market Leadership: Roku reported a 15% year-over-year revenue growth in 2025, reaching $4.7 billion, successfully turning a net loss per share into earnings of $0.59, showcasing its strong performance in a competitive streaming market.
- Platform Revenue Growth: Roku's advertising platform revenue is growing much faster than device sales, and with increasing streaming viewership, profits are expected to rise over the next decade, providing investors with substantial returns.
See More
Investment Risks of Prediction Market ETFs
- Product Innovation: Three investment firms have applied to the SEC for prediction market exchange-traded funds (ETFs), including six different ETFs targeting the 2028 presidential election and the 2026 midterms, indicating strong market interest in prediction markets.
- Lack of Security Holdings: These ETFs will not hold any securities but will focus on upcoming election event contracts, meaning investors will not gain direct exposure to companies like Robinhood that are involved in prediction markets, limiting investment diversity.
- Asymmetric Risk and Reward: Investors holding a party-specific ETF risk losing their entire investment if that party does not win, akin to purchasing event contracts on Polymarket, highlighting that these ETFs resemble gambling more than investing.
- Warning for Long-term Investors: Due to the structure and risk characteristics of these ETFs, experts advise long-term investors to steer clear of such products, predicting they may lead to significant disappointment, especially for those seeking stable returns.
See More
Five Reasons to Buy Robinhood Despite Stock Decline
- Customer Base Expansion: Robinhood's commission-free trading and gamified app have attracted many younger investors, with annual revenue quadrupling from $959 million to $4.5 billion between 2020 and 2025, while the number of funded customers doubled from 12.5 million to 27 million, indicating strong market appeal and growth potential.
- Fintech Ecosystem Growth: Since its IPO, Robinhood has expanded its ecosystem with crypto trading, options trading, and banking services, acquiring nearly a dozen companies to support this expansion, and is likely to continue acquiring to reduce dependence on core brokerage services.
- Regulatory Headwinds Diminishing: Under the Trump administration, the SEC withdrew proposed restrictions on the payment for order flow model and adopted a friendlier stance toward cryptocurrencies, providing a favorable environment for Robinhood and other online exchanges while reducing regulatory risks.
- Profitability Surge: Robinhood returned to profitability in 2024, with EPS rising 31% in 2025, driven by higher interest rates and increased trading fees, while adjusted EBITDA margins improved from 16% in 2020 to 56% in 2025, reflecting enhanced financial discipline and ongoing growth potential.
See More
Investment Firms File for Prediction Market ETFs
- New ETF Trend: Three investment firms have filed with the SEC for prediction market ETFs, which will be based on event contracts tied to upcoming U.S. elections rather than traditional securities, indicating strong market demand for innovative financial products.
- Investment Risk Warning: These ETFs will operate on an all-or-nothing betting model, meaning investors could face significant losses, especially if election outcomes do not meet expectations, potentially resulting in total loss of capital.
- Market Structure Analysis: Unlike traditional ETFs, these prediction market ETFs will not hold any securities, preventing investors from gaining direct exposure to early movers like Robinhood or platforms like Kalshi and Polymarket, thus limiting investment diversity.
- Unsuitable for Long-Term Investment: Due to the structure and risk characteristics of these ETFs, analysts generally believe they are not suitable for long-term buy-and-hold investors, potentially leading to significant disappointment for those chasing short-term market trends.
See More
Regulatory Controversy Between Prediction Markets and Gambling
- Regulatory Challenges: Former New Jersey Governor Chris Christie warns that prediction market platforms may face lawsuits from all 50 states, highlighting the regulatory scrutiny over the blurred lines between prediction markets and gambling, which could hinder industry growth.
- Market Growth: Robinhood CEO Vlad Tenev states that prediction markets represent the fastest-growing business in the company's history, with over 12 billion event contracts traded in 2025 and more than 4 billion in January 2026 alone, indicating strong market demand and potential profitability.
- Leverage Potential: Tenev flagged leverage as the missing piece in prediction markets, which is currently not permissible; however, if regulatory clarity is achieved, it could attract more traders and enhance capital efficiency, akin to how options markets operate.
- Product Integration: Tenev plans to integrate prediction markets directly into the Robinhood platform, allowing users to see related event contracts when viewing specific stocks, which will enhance user experience and potentially increase trading volume.
See More
Prediction Markets Face Regulatory Pressure Amid Controversy
- Market Withdrawals: Polymarket recently archived markets related to nuclear detonations after users placed hundreds of millions in bets, reflecting significant backlash against sensitive topics that could impact its user base and market reputation.
- Rising Regulatory Calls: U.S. lawmakers proposed a bill to restrict markets tied to military actions, regime changes, or deaths, aiming to prevent these markets from incentivizing conflict or exploiting classified information, which could alter the operational landscape of prediction markets.
- Insider Trading Concerns: Legislators expressed worries about insider trading and corruption in prediction markets, accusing Kalshi and Polymarket of allowing trades based on non-public information, potentially undermining market fairness and investor confidence.
- Challenges to Innovation: The CEO of Polymarket noted that despite facing criticism, prediction markets serve a vital informational function, yet the industry's innovation and disruption are met with resistance from traditional regulatory frameworks, which may affect future growth trajectories.
See More
Cathie Wood's Ark Invest Bets on Robinhood and Roku
- Robinhood Growth Potential: In 2025, Robinhood achieved a 52% year-over-year revenue increase to $4.5 billion, with net income rising 33% to $1.9 billion, demonstrating its ongoing efforts in democratizing finance and market appeal.
- Service Diversification: Robinhood is expanding its Gold premium service and launching tax-filing services for high-net-worth users, which not only creates stable revenue streams but also enhances its appeal among younger investors, expected to drive growth over the next decade.
- Roku Market Leadership: Roku reported a 15% year-over-year revenue growth in 2025, reaching $4.7 billion, successfully turning a net loss per share into earnings of $0.59, showcasing its strong performance in a competitive streaming market.
- Platform Revenue Growth: Roku's advertising platform revenue is growing much faster than device sales, and with increasing streaming viewership, profits are expected to rise over the next decade, providing investors with substantial returns.
See More
Investment Risks of Prediction Market ETFs
- Product Innovation: Three investment firms have applied to the SEC for prediction market exchange-traded funds (ETFs), including six different ETFs targeting the 2028 presidential election and the 2026 midterms, indicating strong market interest in prediction markets.
- Lack of Security Holdings: These ETFs will not hold any securities but will focus on upcoming election event contracts, meaning investors will not gain direct exposure to companies like Robinhood that are involved in prediction markets, limiting investment diversity.
- Asymmetric Risk and Reward: Investors holding a party-specific ETF risk losing their entire investment if that party does not win, akin to purchasing event contracts on Polymarket, highlighting that these ETFs resemble gambling more than investing.
- Warning for Long-term Investors: Due to the structure and risk characteristics of these ETFs, experts advise long-term investors to steer clear of such products, predicting they may lead to significant disappointment, especially for those seeking stable returns.
See More
