There are partnerships, and then there are partnerships that look a lot like a dress rehearsal for a takeover. For months, Robinhood has been a firehose of customers for Kalshi, the heavyweight in prediction markets. Now, it seems Robinhood has decided it likes the business so much, it wants to build its own factory instead of just running the biggest store.
- Robinhood is launching its own CFTC-regulated derivatives exchange via a joint venture with Susquehanna, signaling a move from distribution to direct product creation. This move is facilitated by acquiring MIAXdx to secure necessary regulatory licenses immediately.
- Prediction markets have rapidly become Robinhood’s fastest-growing segment, generating an estimated annual run rate exceeding $300 million based on high user engagement. Robinhood currently drives over half of Kalshi’s total market volume.
- This strategic shift aims for Robinhood to capture a higher share of market revenue by integrating its own event contracts alongside existing offerings. This mirrors a common business strategy of pushing a more profitable house brand alongside established names.
The company just announced a new phase in its market ambitions. Through a joint venture with trading firm Susquehanna, Robinhood is launching its own derivatives exchange, fully regulated by the Commodity Futures Trading Commission (CFTC). This isn’t a small step. It’s a leap across the aisle, from a distributor of someone else’s product to a direct creator of its own.
To do this, Robinhood will acquire MIAXdx, which already holds the necessary CFTC licenses. Think of it as buying a house that already has all the permits and wiring in place. You can move in and start cooking right away. Robinhood Markets, Inc. will be in control of the new venture, making it clear who is calling the shots.
Why the sudden move? The numbers tell the story. According to analysts at Bernstein, prediction markets have become Robinhood’s fastest-growing business since they appeared on the app earlier this year. The scale is staggering. We’re talking about more than one million users trading over nine billion contracts. Bernstein estimates this puts the business on an annual run rate north of $300 million.
The connection to Kalshi has been incredibly fruitful. Robinhood already drives more than half of Kalshi’s total market volume. In October alone, Robinhood users generated $2.5 billion in volume, which accounted for 57% of all activity on Kalshi’s platform. Seeing that kind of traffic, it’s not hard to imagine a boardroom conversation that ended with, “Why are we just the middleman?”
Bernstein’s team, led by Gautam Chhugani, believes Robinhood wants to “claim a higher share of the market revenue pool.” The plan seems to be a hybrid one. They’ll likely keep offering Kalshi’s products, but they’ll start mixing in their own event contracts, built on their own exchange infrastructure. It’s a classic strategy. Sell the name brands, but also push your own, more profitable house brand.
A Crowded Field Gets Bigger
Robinhood isn’t making this move in a vacuum. The entire prediction market space is bracing for a shake-up. The quiet hum of competition is turning into a roar. Just as Robinhood prepares its own exchange, another giant is stirring.
Coinbase is expected to roll out its own prediction market product in December. Details are thin, which is typical for Coinbase. We don’t know if they will partner with an existing market or launch their own using a white-label structure (a ready-made platform they can put their own branding on). But clues have surfaced.
Recent peeks into the Coinbase app’s code revealed early modules for both prediction markets and stock trading. This discovery lines up perfectly with a “System Update” event the company has scheduled for December 17, where it promises to show off new products. The crypto world is watching that date closely.
Meanwhile, an old player is returning to the game. Polymarket, Kalshi’s main rival, is re-entering the U.S. market. The company was barred by the CFTC back in 2022 but has since secured an amended designation. This allows it to offer its contracts through approved brokers and merchants, opening the door to a full American comeback.
You can bet Polymarket will be looking for new distribution partners, and fast. They’ve got ground to make up. According to data from The Block, Kalshi has been winning the volume race since September. In October, Kalshi saw $4.4 billion in volume compared to Polymarket’s $3 billion. How Polymarket’s return to the U.S. changes that math is anyone’s guess.
The Great Divide
What we’re seeing is a market splitting in two. Bernstein’s analysts point to an emerging structural divide. On one side, you have the liquidity platforms like Kalshi and Polymarket. They are the ones who create the markets, the “event contracts” on everything from inflation rates to election outcomes.
On the other side, you have the distribution channels. These are the retail brokers and crypto exchanges like Robinhood and Coinbase, with millions of active users ready to trade. For a long time, the relationship was simple. The creators needed the distributors to find an audience.
Now, the biggest distributors are building their own creation tools. With 14 million active traders, Robinhood has what Bernstein calls the “perfect demographic and product market fit” for these markets. Its user base is primed for this kind of activity. So, the company is pushing aggressively to capture more of the revenue for itself.
This is more than just a new feature on an app. It’s a fundamental shift in how this emerging sector is organized. The platforms that own the customer relationship are realizing they hold the most valuable cards. They can choose to be kingmakers for platforms like Kalshi, or they can try to become kings themselves.
Analysts seem to like the move. Bernstein reiterated its “outperform” rating on Robinhood stock with a price target of $160. That suggests a 38% upside from its recent price. The valuation is based on a belief in the company’s long-term earnings potential, and this new venture is a big part of that story.
The prediction market wars have officially begun. The question is no longer just about who can create the most interesting markets. It’s about who controls the path to the customer. And right now, the platforms with the biggest megaphones are deciding they want to write the songs, too.
