Robinhood’s bet on prediction markets is paying off. Here’s how they work.

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Robinhood says prediction markets person exploded successful maturation implicit the past quarter, 1 of the company’s latest concern lines to make $100 cardinal oregon much successful annualized revenue.

“Prediction markets are truly connected fire,” Robinhood CEO Vlad Tenenv said connected the company’s net telephone Nov. 5. “It’s hard to judge we launched this conscionable astir a twelvemonth agone with the statesmanlike predetermination market. We’ve doubled measurement each 4th since past to 2.3 cardinal contracts successful Q3.”

In October alone, the full fig of lawsuit contracts traded connected the level has already exceeded that number, jumping to 2.5 billion.

Robinhood (HOOD), which partners with Kalshi, a federally regulated prediction market, has expanded its categories to see sports, economics, politics, and culture, Tenev said connected the call.

Have an sentiment astir the S&P 500’s closing terms astatine the extremity of 2025? Or whether Treasury enactment yields volition deed 5% this year? Prediction markets springiness you the accidental to enactment wealth connected those lawsuit outcomes and gain payouts for being right.

Learn however prediction markets work, what the risks are, and which platforms are disposable successful the U.S.

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Prediction markets are exchanges wherever radical tin stake connected lawsuit outcomes. The bets are usually made by purchasing binary contracts that wage retired if the lawsuit unfolds the mode you expect. In this context, binary means determination are lone 2 outcomes — often yes oregon nary — and your declaration bets connected 1 of them.

The outgo of an lawsuit declaration is little than the payout. How overmuch little depends connected the odds, which are based connected contracts already purchased.

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Take this question: Will golden outperform bitcoin this year? Let’s presume a $1 declaration payout. If 80% of users judge the reply is yes, the terms connected the “yes” presumption is astir apt adjacent $0.80. And the “no” presumption would outgo astir $0.20. No substance which presumption you buy, you get $1 if you are right. In the little apt script that golden does not outperform bitcoin, your outgo is little portion the instrumentality and the hazard are higher.

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Transaction fees. Prediction marketplace platforms tin marque their wealth connected transaction fees oregon by leveraging the bid-ask spread. Fees tin beryllium adaptable based connected however overmuch you spend. The level Kalshi usually charges $0.02 to bargain a $0.40 declaration and $1.68 to bargain 100 $0.40 contracts. Competing level Polymarket does not complaint fees and alternatively earns connected the quality betwixt the bid terms and the higher selling price.
Funding. Platforms typically necessitate you to unfastened and money an relationship earlier buying lawsuit contracts. The level volition specify your backing options. Kalshi accepts deposits from slope accounts, debit cards, ligament transfers, and cryptocurrency wallets. Polymarket accounts are funded with USDC, a stablecoin.
Interest. Some platforms whitethorn wage involvement connected your relationship balance. As of August 2025, qualified accountholders connected Kalshi tin gain involvement connected their uninvested currency and unfastened positions.
Trading contracts. If you suffer assurance successful your position, you tin merchantability contracts earlier the lawsuit occurs. For example, if you ain “yes” contracts connected golden outperforming bitcoin and you alteration your mind, you tin merchantability those contracts for the marketplace terms — to the grade determination are consenting buyers.
Orders. Prediction markets platforms typically enactment bounds orders. A bounds bid specifies the terms astatine which you privation to bargain oregon merchantability a position.
Event topics. Prediction markets tin screen events successful sports, politics, culture, climate, technology, satellite news, and more.

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Leo Chan, CEO and co-founder of decentralized AI level Sportstensor, explains that “prediction markets are the embodiment of the wisdom-of-the-crowd phenomena but with fiscal stake.”

Chan’s statement points to 2 reasons wherefore prediction markets are making headlines:

Crowdsourced insights. Prediction marketplace likelihood gauge however radical are reasoning astir existent events, and determination is grounds that these likelihood tin beryllium accurate. As an example, prediction markets predicted the result of the 2024 U.S. statesmanlike predetermination erstwhile the polls said otherwise. “They’re a large mode to find retired the existent probability of an event,” said InGame’s concern and concern newsman Daniel O’Boyle.
Trading for the masses. With prediction markets, you tin stake connected lawsuit outcomes that involvement you, with the added inducement of a fiscal reward for being right.

The risks of participating successful prediction markets see fiscal losses and questionable legality.

Event contracts are speculative. You tin easy beryllium incorrect and suffer what you’ve invested. Even worse, the cards could beryllium stacked against you if the different participants are well-funded marketplace makers who are buying and selling contracts connected the aforesaid events astatine antithetic prices.

“There’s a precise bully accidental you’re not betting against different small-time trader similar yourself,” said O’Boyle. “The marketplace shaper mightiness adjacent beryllium owned by the aforesaid institution that owns the exchange.”

“Real-money prediction markets that run successful the U.S. are regulated by the Commodity Futures Trading Commission (CFTC), the aforesaid assemblage that regulates lipid oregon maize futures,” explains O’Boyle.

In 2022, prediction markets relation Polymarket stopped accepting bets from U.S. users astatine the CFTC’s request. The CFTC besides fined Polymarket $1.4 million, claiming the marketplace was an unregistered derivatives platform.

Under the Trump administration, the CFTC probe and different Polymarket enquiry by the Department of Justice are present closed. But authorities regulators proceed to question the legality of sporting lawsuit contracts, according to Covers’ elder quality expert Geoff Zochodne, and respective cases against Kalshi are ongoing.

Prediction marketplace platforms disposable to U.S. users include:

Kalshi. Offers a wide scope of lawsuit categories and aggregate backing options.
Crypto.com. The Prediction Trading marketplace offers $10 payouts.
Robinhood. It launched a prediction markets hub successful the Robinhood app successful 2025.

Polymarket gained CFTC support to relaunch successful the U.S. successful September 2025. The level besides precocious purchased QCEX, a licensed derivatives speech and clearinghouse.

Learn more: Robinhood enters the owe abstraction with discounted rates and wealth toward closing costs

Prediction marketplace participants bargain contracts that wage connected specified lawsuit outcomes. The outgo of the declaration aligns with the likelihood of that outcome. The likelihood tin alteration arsenic the lawsuit approaches and much radical instrumentality positions oregon caller accusation becomes available. Once the lawsuit happens, those who accurately predicted the result person their payout.

Experts are divided connected whether prediction markets facilitate gambling. Leo Chan, CEO and co-founder of decentralized AI level Sportstensor, said intent differentiates prediction markets from gambling.

In Chan’s view, the underlying intent of lawsuit contracts is to speech close information, portion gambling is chiefly entertainment. Daniel O’Boyle, InGame’s concern and concern reporter, doesn’t spot the distinction. Instead, O’Boyle believes staking wealth connected an lawsuit result does represent gambling.

Learn more: How sports betting taxes enactment and what you mightiness owe

Robinhood present offers a prediction marketplace hub wrong their app — a marketplace wherever you tin commercialized connected lawsuit outcomes. Essentially, you tin bargain contracts that could wage retired if a sports game, governmental election, oregon economical lawsuit turns retired the mode you expect.

Learn more: How to instrumentality vantage of Robinhood’s 3% IRA lucifer and 1% connected transfers

To commercialized successful prediction markets, archetypal reappraisal the declaration costs for events that involvement you. If a declaration pays $1 and costs $0.20, that typically indicates a 20% accidental the lawsuit volition unfold arsenic the declaration specifies.

Then, determine however you consciousness astir the 20% odds. If the fig seems excessively low, you mightiness bargain that contract. If the likelihood emergence earlier the lawsuit happens, you tin merchantability the declaration astatine a higher terms oregon clasp your presumption to gain a payout if you deliberation the result volition align with your contract.

Jamie Young and Tim Manni edited this article.

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