Prediction Markets Just Beat Crypto Trading at Robinhood: $173M vs $120M — and Cathie Wood Bought the Dip

Robinhood just made more money letting people bet on events than letting them trade crypto. In the third quarter of 2026, its prediction-market business pulled in $173 million, while crypto trading revenue fell 55% to $120 million. It is the clearest sign yet that the biggest growth story in crypto-adjacent finance is no longer trading coins — it is trading outcomes.

And the plot twist: on Monday, November 2, Cathie Wood's Ark Invest bought the dip anyway, adding Coinbase, Circle and Robinhood shares even as all three stocks fell. Wall Street is split down the middle on this trade. Morgan Stanley just slashed its Coinbase price target by 53%, to $120, warning that the earnings recovery could be weaker than expected. So which side is right — the firm betting that prediction markets are the new engine, or the bank warning that the whole sector is still shrinking?

This article breaks down the numbers behind the flip, why event contracts are outgrowing crypto trading, what most people get wrong about the trend, and what it means for anyone holding crypto, Coinbase stock, or a Robinhood account.

Robinhood's $173 Million Flip: The Numbers That Changed the Story

Robinhood reported third-quarter 2026 revenue of $1.42 billion, up 12% from a year earlier. But the headline number hides a dramatic reshuffle inside the business. Crypto revenue collapsed 55% year over year to about $120 million, while event contracts — bets on elections, sports, economic data and other outcomes — surged to $173 million, a sixfold increase from the same quarter last year.

That means prediction markets now account for about 12.1% of Robinhood's total revenue, while crypto accounts for roughly 8.4%. The crossover actually happened a quarter earlier: in the second quarter, event contracts brought in $156 million against $100 million from crypto. The third quarter just widened the gap. Across the first nine months of 2026, Robinhood's event-contract revenue totals $433 million, rising about 66% from the first quarter's $104 million to the third quarter's $173 million.

The crypto decline was broad. Trading volume on Robinhood's main app dropped 48% to $21 billion, and volume on its Bitstamp exchange slid 28% to $29 billion. Options revenue, by contrast, climbed 31% to $399 million, and equities revenue rose 41% to $121 million. Transaction-based revenue overall rose 19% to $867 million. Crypto was the exception in an otherwise growing quarter — the one business line that shrank while everything else expanded.

For context on how these markets work, see our guide to how crypto prediction markets work, which explains the mechanics behind event contracts that trade between one cent and one dollar and pay out one dollar at settlement.

Coinbase Is Making the Same Bet — and It Is Working Faster

Coinbase reported its third-quarter results on October 29, and the pattern rhymes. Net income climbed 66% from a year earlier to $719 million, up from $433 million, even as total revenue fell 35% year over year to $1.22 billion and was roughly flat against the previous quarter. Transaction revenue dropped 44% to $590 million, while subscription and services revenue declined 20% to $570 million.

Buried in that report was the number that matters most for this story: Coinbase's prediction-markets business has now surpassed $200 million in annualized net revenue, doubling from roughly $100 million in the previous quarter. The company also reported 82% compound quarterly growth in prediction-market revenue over the product's operating history. Chief Financial Officer Alesia Haas said the additional revenue was less correlated with crypto volatility and helped make Coinbase more resilient across market cycles — exactly the pitch Robinhood's numbers now support.

Coinbase also booked about $715 million in gains on its cryptocurrency investments, which helped lift headline net income even as its adjusted net income stood at roughly $78 million. Its fourth-quarter outlook offered little sign of a sharp rebound in trading: about $165 million in transaction revenue through October 25, subscription and services revenue guided at $550 million to $630 million, and adjusted expenses of $1.01 billion to $1.16 billion. For the full year, Coinbase lowered its adjusted expense forecast to $4.15 billion to $4.30 billion.

The takeaway is blunt. Both of America's biggest retail crypto platforms are now growing a business that does not depend on crypto prices going up — and that business is growing precisely while crypto trading is shrinking. As Bitcoin steadies around $76,900 with ETFs losing $399 million in a single day, the platforms that live off trading volume need something that earns in flat and falling markets too. Prediction markets are that something.

Robinhood Q3 2026: Where the Money Came From

Revenue line	Q3 2026	Change vs last year
Total net revenue	$1.42 billion	Up 12%
Event contracts (prediction markets)	$173 million	Up roughly sixfold
Crypto trading	$120 million	Down 55%
Options	$399 million	Up 31%
Equities	$121 million	Up 41%
Transaction-based revenue (total)	$867 million	Up 19%

The table tells the story in one glance. Prediction markets are now Robinhood's third-largest transaction engine, ahead of crypto and essentially tied with equities, and they got there in under a year of serious scaling. Event-contract revenue went from $104 million in the first quarter to $156 million in the second to $173 million in the third — a staircase, not a spike.

Gemini shows how far behind the rest of the field is: its second-quarter filing reported just $524,000 in prediction-market revenue, about 1.2% of its $45 million total. Crypto.com launched its OG prediction platform in February and claims 40-fold weekly growth over six months, without disclosing revenue. Bybit launched its prediction product in June, initially focused on football. The race is on, but Robinhood and Coinbase are the only two players so far turning it into nine-figure revenue.

Why Prediction Markets Are Winning While Crypto Trading Shrinks

Three forces explain the flip, and none of them is a mystery.

First, prediction markets earn in any market. Crypto trading revenue depends on volatility plus enthusiasm: when prices fall and retail traders go quiet, volume dries up. Event contracts generate activity on a calendar that never stops — elections, sports, economic releases, awards, court cases. There is always a next event, even in a crypto winter. That is why Coinbase's finance chief framed the business as a hedge against crypto cycles, not just a side project.

Second, the product is simpler than a coin. A first-time user does not need to understand wallets, gas fees or tokenomics to bet a dollar on an election outcome. The contract pays one dollar or zero, and the price is the market's probability. That simplicity converts casual users that crypto's learning curve loses. If you are new to trading generally, our beginner's guide to crypto trading covers the basics, but prediction markets skip most of that homework entirely.

Third, the timing is perfect. The United States is voting in midterm elections on November 3, 2026, the Federal Reserve's December decision is being priced in real time, and Bitcoin itself is stuck near $76,900 after a brutal October. Every one of those stories is a tradeable event. When the news cycle is this event-dense, a platform that lets users trade the news directly has a structural advantage over one that only lets them trade coins.

What Most People Get Wrong About the Prediction-Market Boom

The obvious reading — "crypto is dead, gambling is the future" — is wrong in at least four ways.

Myth one: prediction markets are replacing crypto. They are replacing crypto trading revenue, not crypto itself. Robinhood still holds crypto for millions of users, Coinbase still custodies billions in digital assets, and both companies still want crypto prices to recover. Event contracts are a diversification play, not an exit.

Myth two: the growth is a one-quarter sugar rush. Robinhood's event revenue has now grown for three straight quarters, and Coinbase's has compounded at 82% per quarter since launch. A spike reverses; a staircase like this one usually means product-market fit, distribution and repeat usage.

Myth three: this is only about elections. Elections are the loudest category, but sports, economic data and corporate events fill the calendar year-round. The midterm vote on November 3 is a catalyst, not the whole business. The test comes in quiet months, when there is no election to bet on — and the early data, with growth through all three quarters of 2026, suggests the calendar holds up.

Myth four: regulators will just let it run. This is the real risk, and Robinhood itself flagged it, warning that enforcement actions, litigation or changes in law could prevent it from continuing to offer event contracts. Prediction markets sit in a legal grey zone between trading, gambling and derivatives, and several states have already challenged sports-related contracts. The business is real, but its legal footing is still being negotiated — a point worth remembering before assuming the growth line goes up forever.

The Bear Case: Morgan Stanley's $120 Coinbase Target

Not everyone is buying the pivot story. On November 2, Morgan Stanley downgraded Coinbase to Underweight from Equal-Weight and slashed its price target from $258 to $120 — a 53% cut. Analyst Michael Cyprys wrote that confidence in the earnings recovery has deteriorated, citing weaker trading activity, a softer revenue outlook and uncertainty following the recent Binance hack.

The bank cut its 2027 revenue forecast by 28% and its adjusted EBITDA estimate by 47%. For 2028, it lowered revenue by 18% and adjusted EBITDA by 25%, and now expects Coinbase to generate $2.4 billion in normalized EBITDA by 2028 — about 14% below 2025 levels, despite the push into new businesses. Coinbase shares fell 3.98% on Monday to close at $137.83, adding to a 10% decline the previous week. Our earlier coverage has the full breakdown of Morgan Stanley's Coinbase downgrade and what it means against Bitcoin.

Morgan Stanley's argument is essentially that prediction markets are not yet big enough to replace a shrinking core. Coinbase's prediction business, at over $200 million annualized, is still a fraction of its $1.22 billion quarterly revenue. Robinhood's $173 million is 12% of its quarter. If crypto trading stays depressed for another year, the new engine has to grow enormously just to stand still — and it has to do so while regulators circle.

Why Cathie Wood Bought the Dip Anyway

Ark Invest's Monday disclosure is the counter-argument in trade form. According to its daily trading disclosure, Ark purchased 24,790 Coinbase shares worth about $3.4 million through its ARKK, ARKW and ARKF funds, 35,657 Circle shares worth about $2.6 million, and 7,703 Robinhood shares worth about $645,820 — all on a day when all three stocks closed lower. Ark also sold 104,172 Bullish shares worth $2.3 million as that stock fell 5.69% to $22.54.

Ark's move came days after Coinbase's earnings and on the same day as Morgan Stanley's downgrade, which makes the timing hard to read as coincidence. The firm is effectively betting that the market is overpricing the crypto-trading slump and underpricing the diversification: prediction markets, subscriptions and services growing while the legacy engine shrinks. It is also a bet on Circle ahead of its third-quarter earnings on November 4, where analysts expect $788.17 million in revenue and earnings of $0.37 per share.

Neither side has to be wrong for the other to be right in the short term. Morgan Stanley can be correct that 2027 earnings look worse than previously forecast, while Ark can be correct that the current prices already reflect that — and that the prediction-market engine is worth more than the market credits. The honest read is that both are describing the same transition from opposite ends: a painful core decline, and a new business growing fast enough to matter but not yet fast enough to replace it.

What This Means for Crypto Traders: 5 Moves to Consider

This is not financial advice, and none of this is a recommendation to buy any stock or token. But the revenue flip changes the landscape traders operate in, and five practical points follow from it.

• Watch platform earnings, not just coin prices. When exchanges earn more from events than from crypto, their incentives shift — product development, marketing and lobbying all follow the money. Platform earnings calls are now leading indicators for where retail attention goes next.
• Treat prediction markets as a sentiment tool first. Event-contract prices are a live poll with money behind it. Before trading a coin into an election, a Fed decision or an ETF deadline, check what the event markets price — they often move before headlines do.
• Do not confuse a hot product with a safe stock. Coinbase at $137.83 after a 53% target cut and Robinhood after a 55% crypto revenue drop are both transition stories. Growth in one division does not erase weakness in another, and regulatory risk applies to the new business most of all.
• Revisit your own diversification. If the biggest platforms in crypto are diversifying away from pure trading revenue, individual holders should ask the same question of their own portfolios. Our beginner's guide to investing in crypto covers allocation basics, and our guide to buying Bitcoin remains the starting point for first-time buyers.
• Mark November 4 on the calendar. Circle reports third-quarter earnings that day, and its numbers will show whether the stablecoin side of the crypto economy is holding up better than the trading side. If Circle beats expectations while exchanges keep shrinking, the story splits further: infrastructure steady, speculation weak.

Frequently Asked Questions

How much did Robinhood make from prediction markets in Q3 2026?

Robinhood reported $173 million in event-contract revenue for the third quarter of 2026, up roughly sixfold from a year earlier and up from $156 million in the second quarter and $104 million in the first. Across the first nine months of 2026, event contracts generated $433 million.

Is prediction-market revenue now bigger than crypto revenue at Robinhood?

Yes. Event contracts brought in $173 million in Q3 2026, compared with about $120 million from crypto trading, which fell 55% year over year. The crossover first happened in the second quarter, when event contracts earned $156 million against $100 million from crypto.

How big is Coinbase's prediction-markets business?

Coinbase said its prediction-markets business has surpassed $200 million in annualized net revenue, doubling from roughly $100 million in the previous quarter, with 82% compound quarterly growth since launch. It remains a small share of Coinbase's $1.22 billion quarterly revenue, but it is the company's fastest-growing line.

Why did Morgan Stanley cut its Coinbase price target to $120?

Morgan Stanley downgraded Coinbase to Underweight and cut its target from $258 to $120, a 53% reduction, citing weaker crypto trading activity, a softer revenue outlook and uncertainty after the Binance hack. It cut its 2027 revenue forecast by 28% and its adjusted EBITDA estimate by 47%.

What did Ark Invest buy on November 2, 2026?

Ark Invest bought 24,790 Coinbase shares worth about $3.4 million, 35,657 Circle shares worth about $2.6 million, and 7,703 Robinhood shares worth about $645,820, while selling 104,172 Bullish shares worth about $2.3 million. All three purchases came as the stocks closed lower on the day.

Are prediction markets legal everywhere in the US?

No — and that is the key risk to the growth story. Prediction markets face different rules across states, sports-related contracts have drawn legal challenges, and Robinhood itself warned that enforcement actions or law changes could prevent it from offering event contracts. The legal framework is still being settled, state by state and case by case.

Conclusion: The Platforms Are Telling You Where the Money Is Going

Follow the revenue and the story is simple. Robinhood's crypto business halved in a year while its prediction-market business grew sixfold. Coinbase's event business doubled in a quarter to over $200 million annualized. Cathie Wood bought the dip in both names on the same day Morgan Stanley cut Coinbase's target in half. The disagreement is not about whether the flip happened — the numbers settle that — but about whether the new engine grows fast enough, and stays legal long enough, to carry companies built on crypto trading.

For crypto traders, the lesson is less about any single stock and more about attention. The platforms that introduced millions of people to Bitcoin are now introducing them to betting on elections, economic data and sports. That changes what retail traders watch, what products get built, and where the next wave of users comes from. Bitcoin at $76,900 and ETF outflows of $399 million in a day say the old cycle is still unwinding. The $173 million quarter says something new is already replacing it — and the race to own that something has barely started.

Sources: CryptoNews on Robinhood's Q3 prediction-market revenue; Crypto Coin Show on Robinhood's Q3 results; CoinCentral on Ark Invest's November 2 purchases; CoinDesk on Morgan Stanley's Coinbase downgrade; TradingView/The Block on Ark's buys and Coinbase earnings.