Morgan Stanley Robinhood Upgrade Event Contracts Analysis

We see a pattern in the fast-growing prediction market sector: related trading companies entering the event-contract space, and outside financial firms and banks positively reassessing the future of these companies.

Morgan Stanley turned more bullish on Robinhood after event contracts, not crypto, did the heavy lifting. Equity researcher Michael Cyprys raised the stock to Overweight from Equal Weight and lifted the target to $150 from $124. He called the prediction market product a “proof point” that Robinhood can earn more from its existing customers.

The note landed on a sharp mix shift. Robinhood event-contract revenue hit $156 million in the second quarter from fewer than 2 million traders, topping $129 million from equities and $100 million from crypto. Cyprys still cut crypto forecasts, then raised 2026 through 2028 earnings estimates by 12% to 15%.

The $150 target implied about 43% upside from Monday’s close. That is a valuation argument built on habit and attach rates, not another token boom that will later trail off.

Robinhood Transaction Revenue Mix: Event Contracts vs. Other Products

Why the Robinhood Overweight Call Hinges on Event Contract Monetization

Cyprys wrote that product velocity is turning into stronger customer economics: more assets, more activity, and more monetization per person. He treated the company’s funded customer base as a distribution engine that didn’t require Robinhood to find a new audience every time a feature shipped. Event contracts are the early evidence.

Chief Financial Officer Shiv Verma said close to 2 million customers have used the event market product and that those traders are more likely to hold a Robinhood retirement account. That overlap is the heart of the upgrade. Contracts are not just a fee line; they are a door into gold, cash, and long-term balances.

Morgan Stanley now models revenue growing about 23% a year to $8 billion by 2028, roughly 6% above consensus in published summaries of the note. Expense growth is projected at near 14% compound, with EBITDA margins moving toward the low-50s. Those figures only hold if contract market engagement survives after the first novelty trade.

Options remain the larger transaction engine. The upgrade still matters because the ledger already shows diversification. LSEG data cited in market coverage showed 22 of 28 covering firms rating the stock a buy or strong buy when the note hit. Cyprys gave that crowd a cleaner story: extract more revenue-generating activity from the installed base and keep spending disciplined.

Robinhood Event Contracts Revenue Hits $156 Million in Q2, Surpassing Crypto and Equities Trading

Robinhood Q2 Event Contract Revenue Hits $156 Million

Robinhood reported record total net revenues of $1.31 billion, up 32% year over year, and transaction-based revenues of $776 million, up 44%. Event-contract revenue jumped more than 10x from a year earlier and rose from $104 million in the first quarter. Net income reached $573 million, and diluted EPS was $0.62.

Volume matched the dollar print. Traders moved 13.6 billion event contracts in Q2, more than 10 times the year-earlier tally and 55% above Q1’s 8.8 billion. July added another 6.1 billion contracts, about 20 times the July 2025 level. Record net deposits of $22 billion and 4.8 million Gold subscribers rounded out a quarter in which 13 business lines ran at $100 million or more in annualized revenue.

Chairman and CEO Vlad Tenev has called the prediction market line the fastest-growing business in the firm’s history. In a short Bloomberg clip after the print, he said it was already “well into the mid-hundreds of millions of annualized revenue,” with football season and the midterms still ahead. That run-rate is what Morgan Stanley is underwriting.

Market accounts seized on the mix the night numbers dropped. One widely shared recap stacked the $156 million event-contract figure against crypto and equities and flagged the 10x volume jump, which is why a product update became a stock story.

Rothera Designated Contract Market and World Cup Trading Flow

Infrastructure is the other half of the thesis. Rothera, the CFTC-licensed exchange and clearinghouse Robinhood operates with Susquehanna International Group, began taking selected flow in late May. Management used the World Cup as the launch window, routing match, group, winner, spread, total, player, and combo contracts onto the new venue while cutting commissions.

In roughly its first month, Rothera handled 2.1 billion contracts and accounted for about $17 million of event-contract revenue. Tenev told the earnings call the venue had “rapidly become a top three” designated contract market. Owning more of the stack lets Robinhood retain economics previously shared with partner venues.

Football season is the next volume test. Separate research from Piper Sandler sketched a base case of about 29.7 billion event contracts from September through December and roughly $320 million of related revenue over those four months. Those figures are not Morgan Stanley’s model, yet they show why desks are treating Fall sports as a significant earnings driver.

Company pages point traders to the in-app hub and to event-contract explainers covering yes/no pricing and resolution. Lower fees at the extremes and live sports scores are meant to keep activity within a single app login. After that, perpetual-style products and agentic trading sit on Cyprys’s longer list of catalysts.

HOOD $150 Price Target After Crypto Revenue Slipped

The target works only if event contracts stayed durable after the World Cup calendar thinned. Q2 already previewed the mix: crypto notional volume landed near $40 billion, including Bitstamp, while crypto revenue fell 38% year over year. Event contracts filled that hole. Consequently, Morgan Stanley could raise medium-term EPS estimates while getting more cautious on digital assets.

Banking deposits, Gold’s rising attach rate, and record net deposits all feed the same “more products per customer” story. Event-contract traders showing up in retirement accounts is the cleanest illustration. The note treats that overlap as longer-duration growth rather than a seasonal spike.

Risks still abound. State fights over sports-linked contracts could redraw listings. Fees could shrink if every large brokerage copies the Robinhood hub. Volume could cool when the sports schedule thins. Cyprys is arguing that current economics already justify a higher multiple than the old crypto-proxy tape allowed.

Shares firmed on the note, then gave back some of the opening pop. The debate has shifted anyway. The question is no longer whether event contracts can matter. It is how much of the 2028 revenue path they can carry without another speculative boom in tokens.

Robinhood Launches 2026 World Cup Prediction Markets To Jump Into the Global Wagering Bonanza

What Event Contract Traders and HOOD Investors Watch Next

Three checkpoints will test the upgrade in public. First is September–December volume against those NFL-season forecasts. Second is the share of flow Rothera captures as listings expand. Third is whether event-contract customers continue to attach to gold, banking, and retirement products after the first trade.

Management has teed up a late-September company event and has talked up newer trading tools. The Overweight case does not need every optional product to hit in 2026. It does need event contracts to remain a high-engagement habit as that sub-2-million cohort grows.

Investors will now parse monthly operating updates for contract counts the way they once parsed crypto notional. July’s 6.1 billion contracts set a noisy bar. A soft football month would puncture the narrative faster than a missed options print. Another step-up could make $150 look conservative.

For traders inside the app, the change is already practical: more contracts, cheaper fees at the extremes, and a venue Robinhood partly owns. For shareholders, Morgan Stanley’s note is a wager that those screens are becoming one of the company’s most important cash engines even while crypto cools.

References

Author

Colin Goldman

Mr. Goldman is a highly experienced marketing and business leader and commentator on digital technology, media, and prediction markets. He has recently served as head of operations at Lines.com and as a senior digital leader at companies such as Spin Media and Relativity. Mr. Goldman has over 20 years of experience in management consulting, finance, consumer technology, and digital media. He has a sharp interest in cultural and business-changing technologies and the democratization of markets. He holds a degree in Economics from Yale University, an MBA from the University of California, Los Angeles, and an executive certification in Digital Assets and Blockchain from Wharton Online.