Robinhood and Coinbase are leveraging existing trading infrastructure to capture prediction market revenue

Robinhood's prediction market hub has become one of its fastest-growing revenue segments, with users trading billions of contracts. The company launched the hub around the 2024 U.S. election cycle, applying the same fee-based model used for its stock and crypto trading businesses. Coinbase is integrating similar features powered by Kalshi's technology, offering contracts on crypto, economics, and geopolitical events. Both platforms earn fees as users trade contracts tied to elections, economic data, sports, and global events. Unlike gambling operators, these platforms do not take the other side of the bets. Cantor Fitzgerald noted that larger user bases attract more trading and improve liquidity, providing established platforms a decisive edge. The platforms' users trade contracts they believe are underpriced or overpriced, a behavior Cantor Fitzgerald identifies as price discovery aligned with financial markets. Federal and state authorities remain split on whether to treat these markets as derivatives or gambling. This lack of regulatory classification limits institutional participation for macro hedging and risk assessment.