By Jack Hough

"Will the U.S. say that aliens exist this year?" Robinhood Markets clients can currently guess "yes" through their brokerage app, paying $4, plus $2 in fees, to win $100 if they're right.

As a stock-and-bond traditionalist who hasn't yet used the firm's services, I have questions. Are alien contracts a growth or value holding? I don't want to throw off my asset allocation. If I've been abducted and probed by extraterrestrials, is it inside information? I haven't yet, but I want to get ahead of any compliance issues. Is this even appropriate for my risk tolerance? Or should I stick with blue-chip holdings, like Bad Bunny winning most-streamed on Spotify?

Don't call these bets. That might draw scorn from state regulators, whose moral flexibility on gambling tends to extend only as far as their taxing authority. Robinhood prefers terms like "prediction markets" and "event trading." "It's the fastest-growing business we've ever had," Chief Brokerage Officer Steve Quirk tells me. It has also helped turn Robinhood from a broken initial public offering into the top two-year performer in the S&P 500.

Robinhood gained a following with stock and options traders more than a decade ago for a killer feature: zero commissions. That contributed to an industrywide fee collapse and consolidation. In 2020, E*Trade sold to Morgan Stanley for $13 billion, and TD Ameritrade went to Charles Schwab for $26 billion. The following year, after a short squeeze in GameStop set off frenzied trading in meme stocks, Robinhood went public for $38 a share. Two years ago, the stock was languishing below $10. Now it's around $120.

Swelling asset prices have played a role. Stocks have enjoyed an epic run, and crypto, which Robinhood began trading in 2019, came roaring back with the election last year of President Donald Trump, whose family has since made billions from crypto ventures. In the run-up to last year's election, Robinhood traded predictions on the outcome. The company has since launched a predictions hub through a partnership with Kalshi, an exchange regulated by the Commodity Futures Trading Commission. Contracts cover economics, politics, pop culture, and more. The biggest draw is sports. Volume has doubled each quarter, to $2.3 billion in the quarter ended September. In October alone, it hit $2.5 billion.

Robinhood is suddenly valued at about $110 billion and is closing in on half the size of Morgan Stanley or Goldman Sachs Group, but with barely a tenth of the profit for now. It's gaining market share across assets and products. Many customers start with speculating and move on to saving, says Quirk. "They say, 'You know what? I came in through crypto or event contracts, and now I'm at this point where I kind of want a retirement account, or a yield account, or even to have some of my assets advised.'"

I'm reminded of a 2018 conversation with executives from Barry Diller's IAC, which would later spin off Tinder owner Match Group. "There are Tinder weddings, Tinder children being born," the CEO at the time told me. In other words, sure, the app is useful for algorithmic canoodling, but many canoodlers end up settling down. Maybe Robinhood is like Tinder, but with a small wrap fee for the married years.

Or maybe we're getting ahead of ourselves, commingling positions in Microsoft and Amazon.com shares with predictions on Seattle Seahawks games, rounded out with crypto coins like BONK, Dogwifhat, and Pudgy Penguins. Robinhood's latest innovation is trading tokenized versions of U.S. stocks in Europe, so that investors there can avoid high fees and paperwork. Quirk sees a tokenized future in which investors can use crypto to tap off-limits assets like private equity and start-ups.

Bring on the token regulators. Paul Atkins, the new pro-crypto head of the Securities and Exchange Commission, said this past week that he would create a "token taxonomy" based on the longstanding Howey Test for telling which assets are investment contracts. So, maybe stock tokens will be treated like stocks, but Atkins also said there are limiting principles. I'm guessing that one limit is that Howey bases crypto rules on an 80-year-old Supreme Court decision involving the sale and lease-back of Florida citrus groves.

Maybe we need a new securities test, or at least a way to tip off novices about whether they're building wealth or betting it. For example, if an asset has an ironic pet reference in the name, it might not be an investment. But Datadog is unironic, and an S&P 500 member. Don't dismiss playful-sounding names altogether. Boeing sounds like it could be a Bonk spinoff, but sources tell me it's an actual maker of airplanes. If an asset rises and falls with quarterly earnings calls by a CEO, it's probably an investment, but if it hits or dies based on Monday night play-calling by Joe Buck and Troy Aikman, it sounds like a bet.

Robinhood trades at 60 times projected earnings and is expected to bring in $4.5 billion in revenue this year, up 53%. The company sees a total addressable market of $400 billion, retail and institutional, and believes that it will be a key beneficiary of the baby-boomer wealth transfer. It's attracting competition and pushback. Interactive Brokers Group, WeBull, and Crypto.com offer prediction markets. FanDuel and DraftKings will soon, after walking away from ties to Nevada gambling. CME Group and Cboe Global Markets are getting in on predictions. Massachusetts is taking Kalshi to court. New York is considering a bill that would regulate some event trading like gambling.

I'm intrigued to see what investment product breakthroughs are next. How about scratch-off stock portfolios? Nah, the line at the Mobil Mart would look like a trading pit. Could Lotto balls decide earnings surprises? Put that on the maybe list. How about a prediction market for dying? Wait, that's called life insurance. Could a tokenized stock issue shares of the tokens, and then make tokens of those shares, and so on, like an equity Escher drawing? I'm not sure what the use case would be, but that's no reason to stand in the way of innovation.

Write to Jack Hough at jack.hough@barrons.com

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November 14, 2025 12:32 ET (17:32 GMT)

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