When most investors think about Robinhood Markets (HOOD +0.10%), they probably think about equity trading and, to a lesser extent, crypto trading. But that narrative has now been turned on its head.
Just check out Robinhood's latest earnings report, for the 2026 second quarter. The company generated $156 million in revenue from prediction-market trading, $129 million from equity trading, and $100 million from crypto trading.
Robinhood's quarterly earnings report
This is unlikely to be an anomaly, either. According to the investment firm Bernstein, Robinhood's prediction-market revenue is set to grow at a compound annual rate of 64% over the next few years.
Other new areas of trading -- including perpetual futures and tokenized equities -- could also see a big spike in the coming years. No wonder, then, that Bernstein recently ratcheted up its price target from $130 to $160. Currently, the stock trades for just $90.
NASDAQ: HOOD
Key Data Points
A "generational shift"?
Crypto investors should take note. Bernstein refers to a "generational shift" in how retail investors trade.The recent introduction of prediction-market trading at Robinhood has been extremely successful, and the company now has the scale (14 million monthly active users) to make future product launches just as successful.
So what's driving this "generational shift"? Most likely it has to do with the changing fortunes of the crypto market. In a bullish market cycle, it's possible to make money with spot crypto trading. But in a bearish market cycle, such as the one Wall Street is experiencing now, it's much more difficult.
Just check out the list of the top 20 cryptocurrencies by market cap. Only a handful are in the green this year. Even Bitcoin, the market behemoth, is down nearly 50% over the last year. No wonder, then, that Robinhood saw a 38% decrease in crypto trading revenue for the quarter.
Image source: Getty Images.
The role of prediction markets
And that's where prediction markets come into the picture. It's possible to make money with prediction-market contracts, even in a flat-to-down market. Investors are simply betting "yes" or "no" if a certain event occurs.
So, let's say you don't have much conviction that Bitcoin will maintain its current price of $65,000. You could easily buy "yes" event contracts for the crypto to hit a variety of lower price points, including $55,000, $50,000, and $45,000. Or you could just as easily buy "no" event contracts for Bitcoin hitting one of many higher price points.
This might sound highly speculative, and perhaps it is. But it could also become a sophisticated new form of hedging, using financial derivatives. If you already have a large Bitcoin position, it might make sense to buy some downside protection.
More than any other retail trading platform, Robinhood seems to have figured out the mindset of the typical crypto investor. And that's why I'm also bullish on Robinhood. If these new ways of trading crypto take off, then it will be well-positioned to take advantage.
