A contract that pays $1 if something happens and nothing if it doesn’t is now one of the fastest-growing products at Robinhood Markets (NASDAQ:HOOD). Event contracts traded jumped more than tenfold in fiscal Q2 2026, to a record 13.6 billion, even as crypto trading shrank.
Robinhood runs the app where millions of people buy stocks, options, and crypto, and increasingly bank, borrow, and save for retirement. It earns money from trading activity, interest on customer balances, and subscriptions. Prediction markets are the newest add-on. Whether the stock deserves its premium depends less on how fast those contracts grow than on who gets to decide whether they can.
A brokerage that keeps adding $100 million businesses
Robinhood’s edge is breadth built on scale. The platform counts 28.4 million funded customers and $369 billion in platform assets, and 13 business lines have now passed $100 million in annualized revenue, including the Legend trading platform and the credit card. Gold subscribers hit a record 4.8 million, and net deposits reached a record $21.7 billion in the quarter. A longtime brokerage giant sits at the other end of the retail-investing spectrum; you can read our analysis on it here. Each new product gives customers another reason to keep their money and activity in one place, which is how a trading app starts to resemble a financial home.
Event contracts surged while crypto shrank
The mix is what changed. Transaction-based revenues rose 44% to $776 million, led by event contracts at $156 million, up over tenfold, alongside options at $342 million, up 29%, and equities at $129 million, up 95%. Crypto revenue fell 38% to $100 million. During the quarter, Robinhood also launched Rothera, a CFTC-licensed exchange and clearinghouse run independently through a joint venture with Susquehanna International Group. Prediction markets have passed 3.5 billion contracts traded to date, and a stake in the venue gives Robinhood more say over a product it now leans on. Crypto trading is the part of Robinhood that shrank; here’s a crypto stock you might be interested in instead. Net interest revenue, meanwhile, rose just 9% to $389 million, as lower short-term rates offset growth in interest-earning assets. The moat is widening, but the growth is leaning on one line.
What if regulators narrow the market?
Robinhood’s own disclosures name the risk. The company says regulatory enforcement actions, litigation, and changes in federal or state law could stop it from offering event contracts. That matters because the product is no longer a side project: it produced $156 million of revenue in a single quarter, and the quarter’s record volumes included prediction markets.
The exposure isn’t total. Options and equities revenue kept growing, and Rothera carries a federal license. A restriction would hit the fastest-growing line, but the rest of the business would still be there. Sports-betting and prediction-market stocks face a similar legal question; read our analysis on a top sports betting company.
A premium multiple with a legal asterisk
At 44.21 times expected earnings, investors are paying $44.21 for every $1 of forward profit. That sits above Robinhood’s five-year average of 37.12 and far above the sector’s 11. Analysts expect EPS to grow 34.79% in 2027, which explains part of the premium. The quarter’s reported EPS of $0.62 included $0.14 of one-time gains, primarily from deconsolidating a fund, so the forward figure is the cleaner gauge.
Underlying momentum is real: adjusted EBITDA (a non-GAAP profit measure) rose 35% to $741 million, and the company repurchased $414 million of stock. High-growth fintech stocks carry very different multiples; here’s a cheaper one. Still, the stock is priced above its own history while its fastest-growing line carries an unresolved legal question, which leaves less room for a regulatory disappointment.
Hedge fund interest ticked up, with 87 funds holding the stock in the most recent quarter, up from 84 in the prior one. Short interest stands at 4.62% of the float, relatively limited bearish positioning.
The answer hangs on a ruling, not a quarter
The evidence points to a business that’s growing quickly and diversifying, but whose fastest-growing line rests on legal ground that isn’t settled. A forward P/E of 44.21 already asks investors to pay above Robinhood’s own history for that growth, so the multiple has little cushion if the rules tighten. The setup suits investors who can live with sharp swings and treat prediction markets as upside rather than the base case. A clear restriction on event contracts would change the picture. So would a rebound in crypto and net interest revenue that makes the revenue mix less lopsided.
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This article is originally published at Insider Monkey.
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