Will Legal Action Slow HOOD's Event Contracts Business Growth?

Robinhood Markets, Inc. HOOD and two other prediction-market operators have come under the radar of Connecticut’s Department of Consumer Protection. Yesterday, the agency’s gaming division issued a broad halt order aimed at Robinhood Derivatives, Kalshi and Crypto.com, arguing that their event-based contracts amount to unlicensed sports gambling under state law. The platforms have been instructed to immediately stop offering or promoting these contracts to residents, asserting that the services fall outside the state’s regulated gaming framework.

State officials contend that products resembling sports bets must be provided only by licensed operators, and they maintain that none of the named firms hold the required approvals. Regulators further argue that the contracts mirror wagers that the state prohibits for individuals under 21 and that the platforms have promoted offerings to groups, including self-excluded users and college students, who are ineligible to participate.

However, Robinhood underscored that its event contracts fall under federal oversight, emphasizing that Robinhood Derivatives is registered with the Commodity Futures Trading Commission (CFTC).

Event contracts, which are also called prediction-market or binary outcome contracts, allow traders to speculate on whether a certain event will happen. The first public event contract product from HOOD was for the 2024 U.S. presidential election. Later, in March 2025, HOOD launched a prediction markets hub inside its app, enabling contracts not just for politics, but economics, entertainment and other event-based outcomes.

While Robinhood has had to suspend sports-related event contracts following the direction of the CFTC, which believes that such contracts resemble gambling more than traditional hedging or risk-management derivatives, event contracts represent a potentially large revenue stream for HOOD.

HOOD’s Competition in the Event Contracts Business

Robinhood’s fast-growing event-contracts business faces competition from DraftKings Inc.’s DKNG recent entry into the prediction market through its planned acquisition of Railbird Technologies Inc. and its wholly owned subsidiary, Railbird Exchange, LLC.

DraftKings’ Railbird acquisition gives it a CFTC-regulated foothold to offer event prediction trading, even in states like California and Texas that ban sports betting. DraftKings and HOOD both target similar young, mobile, risk-tolerant users. While Robinhood offers lower fees and broader access, DraftKings may face regulatory limits but will differentiate through its entertainment-focused, gamified approach to event-based prediction markets.

Likewise, Interactive Brokers’ IBKR Forecast business has also grown during 2025, scaling far beyond its pilot stages and emerging as a credible institutional-grade competitor in the global prediction market space. The platform operates under the ForecastEx LLC subsidiary, regulated by the CFTC, and offers trading nearly 24 hours a day, six days a week across global regions.

In the third quarter of 2025, Interactive Brokers reported record net revenues of $1.66 billion, with management highlighting the Forecast Contracts business as a key growth driver.

Unlike Robinhood or DraftKings, which focus heavily on sports or entertainment events, Interactive Brokers’ Forecast products emphasize economic, financial, government and climate indicators, aligning with the company’s more analytical and professional trading demographic.

Robinhood’s Price Performance, Valuation & Estimate Analysis

Over the past year, HOOD shares have skyrocketed a whopping 243.4%. In the same time frame, the industry has rallied 24.3%.

Given the impressive price performance, HOOD shares are currently trading at a massive premium to the industry. The company has a 12-month trailing price-to-tangible book (P/TB) of 15.32X compared with the industry average of 3.00X.

The Zacks Consensus Estimate for Robinhood’s 2025 and 2026 earnings implies year-over-year growth of 78.9% and 16.2%, respectively. In the past 30 days, earnings estimates for both years have been revised upward.

Currently, HOOD sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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