Robinhood’s HOOD prediction markets expansion is colliding with tougher state gaming enforcement, and Connecticut and Michigan show how regulatory friction could slow a business that is becoming increasingly important to HOOD.
Last week, Connecticut ordered Robinhood and eight other platforms to immediately stop offering sports event contracts to residents, while issuing nearly 30 subpoenas tied to its broader investigation. The state says these products violate gaming and unfair-trade laws and warned that non-compliance could trigger civil or criminal penalties. Connecticut also noted that a federal judge ruled in August that sports event contracts constituted illegal unlicensed gambling and were not shielded by federal commodities law.
Michigan adds another constraint. Under a court-approved Sept. 4 agreement, Robinhood stopped offering new sports-related event contracts in the state by Sept. 9 and must close remaining customer positions by Oct. 9. Importantly, the restriction covers contracts traded on CFTC-regulated designated contract markets, including Kalshi and Robinhood-backed Rothera.
The timing matters. Robinhood generated $156 million of event contract revenues in the second quarter, up more than 10-fold year over year and above equities revenues of $129 million and crypto revenues of $100 million. Event contract volume reached 13.6 billion in the second quarter. August volume was 4.7 billion, down 23% sequentially but still 15 times the year-ago levels.
The two-state pullback will not derail Robinhood’s nationwide push, but additional state restrictions could limit market access, increase compliance costs and temper sports-driven growth. Until the federal-state jurisdiction dispute is resolved, regulatory uncertainty is likely to remain an overhang on this fast-growing revenue stream for HOOD.
HOOD’s Competitors in the Prediction Markets Business
Robinhood faces intense competition from Interactive Brokers IBKR and Coinbase Global COIN in the prediction markets business.
Interactive Brokers has created a unified prediction-market interface spanning its ForecastEx platform, Kalshi and CME Group, with orders routed toward the best available net price. Interactive Brokers plans to add more exchanges and remains focused on economically relevant events such as elections, climate and macro indicators, while expanding weather offerings into hurricane-landfall and insurance-risk contracts.
Coinbase Global is scaling even faster. Its prediction market contracts and revenues jumped 106% sequentially in the second quarter of 2026, pushing the business above $100 million in annualized revenues. Coinbase’s new crypto-binary experience drove roughly three times as many daily traders and four times the daily revenue versus May averages, while management plans to add combination trades.
HOOD’s Price Performance, Valuation & Estimate Analysis
Over the past six months, Robinhood’s shares have jumped 42.8% compared with the industry’s growth of 22.6%.
Image Source: Zacks Investment Research
HOOD shares are currently trading at a premium to the industry. The company has a 12-month trailing price-to-tangible book (P/TB) of 11.47X compared with the industry average of 3.27X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Robinhood’s 2026 earnings suggests a year-over-year increase of 2.9%. The trend is likely to continue next year, with earnings expected to jump 33%. In the past 30 days, earnings estimates for 2026 and 2027 have been revised higher to $2.11 and $2.81 per share, respectively.
Image Source: Zacks Investment Research
HOOD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This innovative software-as-a-service firm upped its user base +22% year over year. That rate is increasing and margins are expanding as AI efficiencies take effect. Of course, all our elite picks aren't winners, but this one could far surpass earlier Zacks' Stocks Set to Double like D-Wave Quantum, which shot up +680.1%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Robinhood Markets, Inc. (HOOD): Free Stock Analysis Report
Interactive Brokers Group, Inc. (IBKR): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).