1. Sports contracts now outearn crypto at Robinhood
Robinhood booked $173 million in revenue from event contracts in the third quarter of 2026, more than the $120 million it made from crypto trading, and most of that growth came from sports, the company disclosed in its quarterly SEC filing. The surge comes as states move to shut down sports contracts and a prediction markets sports betting ban becomes a live possibility.
Event contracts are simple in principle. A customer buys a position that pays out if a particular outcome occurs, such as a team winning a game, a candidate winning an election or some other event resolving a certain way. Exchanges such as Kalshi list these products as derivatives regulated under federal commodities law, and the companies involved argue that this federal status places them beyond the reach of state gambling statutes.
State regulators and attorneys general reject that view. In their eyes, a contract that pays out on the result of a football game is a sports bet, and an operator offering it without a state gaming license is running an unlicensed sportsbook. That disagreement has turned a fast-growing revenue line for brokerages and crypto platforms into one of the most contested legal questions in American finance.
2. A sixfold jump in a single year
The scale of the shift at Robinhood is striking. A year earlier, event contracts generated $27 million for the company. In the third quarter of 2026 the figure reached $173 million, roughly 12% of total net revenue, which works out to more than six times the prior-year level.
Over the same stretch, crypto trading moved sharply in the other direction. Robinhood's crypto revenue fell from $268 million to $120 million, a decline of more than half. For a company that built much of its brand on retail crypto access, the reversal means a product category that barely registered a few years ago now contributes more to the top line than digital asset trading does.
That mix matters for investors because the two businesses carry very different risks. Crypto revenue rises and falls with token prices and trading enthusiasm. Event-contract revenue, by contrast, depends heavily on whether courts and regulators allow the products to be sold at all, and in which states.
3. How Coinbase, Kalshi and Polymarket fit in
Robinhood is not alone. Coinbase offers Kalshi contracts to its customers and says the business has passed $200 million in annualized revenue. Coinbase reports the line as a run rate rather than as a quarterly total. Measured against the exchange's third-quarter revenue pace, that run rate amounts to about 4% of the company's revenue. Chief Financial Officer Alesia Haas told analysts on the company's earnings call that more than half of the contracts traded were tied to events other than sports.
Kalshi itself has become one of the most valuable private companies in the sector. It closed a $1 billion funding round on October 29 at a $40 billion valuation, and its trading volume in October reached a record $98.2 billion, based on an analysis of trading data.
Polymarket, Kalshi's chief competitor, arrived in U.S. sports later. Its federally regulated U.S. app started admitting users from a waitlist in December 2025, close to a year after Kalshi first listed sports contracts. Polymarket now faces lawsuits from Wisconsin, filed in April, Kentucky, filed in June, and New York, filed in September. In Ohio it has chosen to go to court against the state rather than stop offering sports contracts there.
4. Is Robinhood prediction markets sports betting?
States increasingly say yes, while Robinhood and its peers say no. The companies maintain that event contracts are federally regulated derivatives, but state regulators and attorneys general treat contracts on game outcomes as unlicensed sports wagering, and a majority of the federal appeals courts that have ruled so far have sided with the states.
The practical consequences are already visible. Robinhood has agreed to stop offering new sports contracts in Michigan and Ohio, following a similar step it took in Nevada the year before. Coinbase is ending sports contracts in Ohio on November 13. On Monday, November 9, Robinhood filed suit against Missouri after the state warned it would go to court within days.
Robinhood's agreements with states follow a common pattern. The company stops listing new sports contracts, and in return each state agrees not to enforce its gaming laws against Robinhood while the appeals play out. In its filing, Robinhood also cautioned investors that it may stop offering certain new event contracts in additional states.
5. Appeals courts split, with most favoring the states
Three federal appeals courts have now weighed whether federal commodities law overrides state gambling rules, and two of them have backed the states. In April, the Third Circuit found that Kalshi had a reasonable likelihood of succeeding on its argument that federal law preempts New Jersey's gambling statute.
The Ninth Circuit went the other way in August, ruling in favor of Nevada. In September, the Sixth Circuit concluded that federal commodities law "neither expressly nor impliedly preempts" the gambling laws of Ohio and Tennessee, a clear win for state regulators.
A fourth court has since weighed in on a procedural question. On November 3, the Second Circuit declined to halt enforcement actions brought by New York and Connecticut against Kalshi and Coinbase while those cases are on appeal, leaving the states free to press ahead.
Splits between federal appeals courts are one of the main reasons the Supreme Court agrees to hear a case. With petitions on the subject already pending, the justices could decide as early as January whether to take up the question, which would ultimately settle whether a single federal framework governs these contracts nationwide.
6. State enforcement spreads beyond the courtroom
Outside the appellate fight, individual states are stepping up their own actions. A Michigan court ordered Kalshi to block the state's residents from sports contracts, with potential fines of up to $500,000 a day. Robinhood, Coinbase and Polymarket each agreed to stop offering sports contracts in Michigan.
In October, Ohio's casino regulator sent cease-and-desist letters to 10 operators. In California, a federal judge barred Kalshi from offering sports contracts on the lands of two Native American tribes, which run their own gaming operations under federal law.
Arkansas became the latest state to sue Kalshi on November 4. Attorney General Tim Griffin framed the case around what the products actually do rather than how they are labeled, saying that "Arkansas law is concerned with substance, not semantics." His point captures the core of the states' position: calling a sports wager a derivative does not change what it is.
7. The CFTC pulls in the opposite direction
While states push the contracts out, federal regulators are pushing them back in. On November 5, the Commodity Futures Trading Commission, which oversees these markets, told exchanges that they may not block customers based on the state they live in. The interpretation is set to take effect this month.
That leaves exchanges and brokers in an awkward spot. The federal regulator wants the products offered in every state, while some courts have ordered companies to stop serving residents of particular states. Complying fully with one can mean defying the other, and the companies have no clear way to satisfy both until the conflict is resolved at a higher level.
Behind the dispute is a basic division of authority. Gambling has traditionally been regulated by the states, each of which decides whether and how sports betting is licensed and taxed. Derivatives markets, by contrast, fall under federal oversight, and the exchanges argue that once a product is listed as a federally regulated contract, states lose the power to treat it as a wager. Whichever framework applies determines not only who can offer the contracts, but also who collects the licensing fees and taxes attached to them.
The tension is a familiar one in American financial regulation, where federal agencies and state authorities often claim overlapping jurisdiction. What makes this case unusual is how quickly the money has grown while the legal question remains open, and how directly the outcome will shape the revenue of publicly traded companies.
8. Why the midterms raise the stakes
The political backdrop has shifted as well. The midterm elections returned Democrats to power in several states, adding to the pressure on prediction markets at the state level. For investors, the central question is how much of the event-contract business depends on federal law ultimately winning out over state gambling rules.
If federal preemption prevails, platforms such as Robinhood, Coinbase, Kalshi and Polymarket could continue offering sports contracts nationwide under a single set of rules. If the states win, those companies could be forced into a patchwork of state-by-state restrictions, or out of sports entirely in many markets, which would cut directly into the fastest-growing part of their businesses.
For Robinhood in particular, the exposure is now meaningful. A revenue line worth roughly 12% of quarterly net revenue, much of it driven by sports, is a significant amount to put at legal risk, especially at a time when crypto trading revenue has been falling.
9. What comes next for prediction markets
Two dates stand out on the calendar. The CFTC has a deadline in December connected to its push on state access, and the Supreme Court could decide in January whether to review the conflicting appeals court rulings on sports contracts.
In the meantime, the state-by-state retreat is likely to continue. Robinhood has already warned that more halts may follow, Coinbase's Ohio exit takes effect on November 13, and lawsuits in Missouri, Arkansas, Ohio, Wisconsin, Kentucky and New York remain active. Until a court with national reach rules, the prediction market boom built on sports will keep running into a growing list of state borders.