Robinhood Markets (HOOD) is taking a cautious step in one of its fastest-growing businesses. The firm is expanding into prediction markets, but it is also choosing to avoid certain types of bets that could raise legal and trust concerns.
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The move comes as crypto-derivatives">the industry faces rising scrutiny over how some traders may be using private information to gain an edge.
In the meantime, HOOD shares dropped 1.33% on Friday, closing at $69.19.
A Selective Approach to Growth
Robinhood has partnered with Kalshi, a regulated U.S. prediction market, to offer users the ability to trade on event outcomes. These include sports, elections, and even broader topics like financial events or scientific discoveries. The company sees this as a major growth area, with expectations of about $300 million in annual revenue.
At the same time, Robinhood is not offering every type of contract. Jordan Sinclair, president of Robinhood UK, said the firm is focused on avoiding risky areas. “We don’t necessarily offer all prediction markets or all event contracts,” he said. “There are some we’ve chosen that aren’t right for our customers.”
In particular, the company is avoiding so-called mention markets. These allow traders to bet on what words will be used in speeches or public events. Sinclair said these are excluded “for exactly some of those concerns” tied to market abuse and insider trading.
Rising Concerns Over Insider Activity
The caution reflects real cases that have raised alarms. In recent months, several prediction markets have seen bets that appeared to be placed with advance knowledge.
For example, reports showed large and well-timed bets ahead of a U.S. military strike on Iran. In another case, Israeli authorities charged two people with using classified information to place bets tied to military actions.
There have also been concerns outside of politics. Bets surged ahead of a Nobel Peace Prize announcement, which led to a probe into a possible leak. In a separate case, a former editor tied to a major YouTube (GOOGL) channel was fined $20,000 after trading on inside knowledge of future content.
These events highlight a key risk. When outcomes depend on private or sensitive information, prediction markets can create incentives for misuse.
Regulated vs Unregulated Platforms
Robinhood’s strategy also reflects a clear market divide. Its partner, Kalshi, requires users to verify their identity and follow U.S. rules. In contrast, rival platform Polymarket allows trading through crypto wallets, often without full identity checks.
This difference matters for a public company like Robinhood. By working with regulated partners and limiting certain contracts, the firm reduces its exposure to legal and reputational risks.
At the same time, the company continues to invest in the space. Chief executive Vlad Tenev said prediction markets were the firm’s “fastest-growing business ever” in 2025, with more than 12 billion contracts traded. He added that the market could grow into a “supercycle” with trillions in annual volume over time.
Overall, Robinhood is trying to balance growth with caution. The company is leaning into a new revenue stream while setting limits on the types of bets it considers too risky for its platform and users.
Is HOOD a Good Stock to Buy?
On the Street, Robinhood has a Strong Buy consensus view, based on 17 analysts’ ratings. The average HOOD stock price target is $106.20, implying a 53.49% upside from the current price.
