Prediction Markets Drive Robinhood's Momentum, According to Industry Analyst
Prediction markets have become a key growth driver for Robinhood over the past year.
According to analysis from Piper Sandler, sports are already generating close to $200 million for the platform as of the latest data.
The investment firm, which reiterated an overweight rating on Robinhood, raised its price target to $140 from $120, estimating a potential 12% upside. Analyst Patrick Moley noted that event contracts present significant growth prospects for the trading platform.
Much of this growth is driven by Robinhood's partnership with Kalshi, a regulated trading platform that offers event-based markets. Kalshi includes NFL and NCAA contracts on Robinhood's platform, driving record monthly betting volumes last September. Piper Sandler said the companies share revenue evenly with a revenue split of a 2-cent fee per contract.
Despite this momentum, the exchange has encountered opposition in several states, where regulators suggest that sports-related contracts may violate gaming laws. Numerous jurisdictions have instructed the exchange to suspend its business operations, casting some doubt on the long-term accessibility of sports-related markets.
Kalshi has moved to challenge those directives, arguing its operations fall under federal regulatory authority rather than state oversight.
Investor sentiment on Robinhood remains positive, with two-thirds of analysts tracked by LSEG rating the stock a buy or strong buy. Shares were up 0.43% in premarket trading on Tuesday, extending gains of more than 200% year to date.
Robinhood challenges Massachusetts regulators
The growing role of prediction markets has also prompted legal challenges. Robinhood filed a lawsuit against Massachusetts Attorney General Andrea Joy Campbell and the Massachusetts Gaming Commission, trying to stop Massachusetts state gaming laws from being applied to its event-contract trades.
The company seeks declaratory and injunctive relief and argues that federal law preempts state-level regulation under the Supremacy Clause.
Robinhood contends that while orders are placed through its app, all trades are executed on KalshiEx LLC, a Commodity Futures Trading Commission (CFTC)- regulated exchange. It emphasizes that Kalshi is registered as a futures commission merchant and already adheres to federal compliance standards.
The case responds to a lawsuit filed by Massachusetts earlier this month, which accused Robinhood and Kalshi of facilitating illegal sports wagering. Regulators claimed customers could view and access Kalshi contracts directly through Robinhood's platform. Robinhood countered that about $1 billion in Kalshi bets were processed in the second quarter alone, generating roughly $10 million in revenue for the exchange.
The brokerage maintains that the Commodity Exchange Act gives the CFTC sole jurisdiction over event contracts, commodity futures, and swaps, warning Massachusetts against regulating federally governed activity. Similar disputes have emerged in New Jersey and Nevada, where courts granted injunctions preventing state enforcement against Kalshi's operations.
