Robinhood (HOOD) Stock: Prediction Markets Revenue Jumps 10X as Cramer Stays Bullish

TLDR

• Robinhood’s event contracts revenue hit $156 million in Q2, more than 10 times last year’s figure.
• Prediction markets volume averaged 152 million contracts a day in August, 14 times the year-ago pace.
• HOOD trades near $118, down about 2% today but up roughly 11% over the past week.
• The stock carries a forward P/E of about 45, above Interactive Brokers and Charles Schwab.
• Lawsuits and state regulators are challenging Robinhood’s sports and event contracts in several states.

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Robinhood Markets (HOOD) shares sit near $118 today, down about 2%, after climbing roughly 11% over the past week. The move comes as investors digest just how fast the company’s newest business is scaling.

Robinhood Markets, Inc., HOOD

That business is event contracts, Robinhood’s version of prediction markets. Customers buy contracts that pay $1 if they guess an outcome correctly, whether that’s an election or a football game, and nothing if they don’t.

In the second quarter, event contracts brought in $156 million of revenue. That’s more than 10 times what the line produced a year earlier.

For context, options revenue grew 29% year over year. Equities jumped 95%. Crypto actually fell 38%. Nothing else at Robinhood is growing like this.

Prediction Markets Now Rank Number Two

A year ago, event contracts were Robinhood’s smallest trading line. Now only options bring in more revenue.

The company traded 13.6 billion contracts in Q2, more than 10 times last year’s volume. Customers were placing about 152 million contracts a day in August alone, 14 times the year-ago pace.

That growth hasn’t gone unnoticed. Jim Cramer has praised the business, along with Robinhood’s newer Gold Card, which offers 3% cash back. He called the company “on a major roll.”

Robinhood’s broader Q2 numbers back that up. Net deposits hit a record $22 billion. Platform assets rose 32% to $369 billion. Gold subscribers grew 39% to 4.8 million.

Thirteen separate business lines each generated more than $100 million in revenue during the quarter. That’s a wide spread for a company once known almost entirely for commission-free stock trades.

The Legal Picture Gets Messier

Growth this fast tends to attract scrutiny, and Robinhood’s prediction markets are no exception. Plaintiffs in six states have sued to recover losses under state gambling laws.

Native American tribes have also sued over sports contracts offered on their lands. A federal appeals court sided with two tribes in late August, finding they’ll likely win their claim.

That same court cleared Nevada to apply its gambling laws to Robinhood’s sports contracts. Missouri’s attorney general went further, ordering Robinhood and five other operators to stop offering sports contracts in the state entirely.

Massachusetts securities regulators are also examining the offerings, according to Robinhood’s latest filing. The company itself warns that new laws could force it to pull event contracts altogether.

August volume already cooled, falling 23% from July. Even so, at the second quarter’s revenue-per-contract rate, the business would still generate roughly $650 million annualized.

Robinhood is leaning further into the space anyway. In January, a joint venture with Susquehanna International Group bought 90% of MIAX Derivatives Exchange, a regulated derivatives exchange and clearinghouse.

Meanwhile, HOOD trades at about 42 to 45 times forward earnings, well above Interactive Brokers’ 28 and Charles Schwab’s 12.8. Short interest sits at 4.62% of float, higher than both those peers.

Companywide, Robinhood posted record revenue of $1.31 billion in Q2, up 32% year over year, with net income climbing 48% to $573 million. Roughly 36% of total revenue still depends on equities and options.