Last week, Robinhood's third-quarter earnings fell well below Wall Street estimates, causing the company’s share price (HOOD) to sink more than 10%. With crypto trading down 78% from the prior three-month period, the company needs to lure more investors to use their platform, especially for trading cryptocurrency.

Now it's offering free dogecoin (DOGE-USD) along with BTC and ETH through a sweepstakes in partnership with fast-food giant Burger King, which is owned by Restaurant Brands International (QSR).

“Crypto is fun. It's also deeply technical. Finding ways to make it more accessible, to break down that emotional barrier for people getting involved in the market, is something that we're constantly prioritizing,” Christine Brown, Robinhood Crypto COO, told Yahoo Finance.

Robinhood's bet on whether a Burger King Whopper can lower the inhibitions of new traders on the fence about crypto might not seem like the most obvious manifestation of its mission to “democratize finance.” But Brown said that like dogecoin itself, the sweepstakes could make crypto seem less intimidating.

“It's a beautiful mission but their business model is set up completely contrary to the mission,” said Chris Schwarz, associate professor of finance at the University of California, Irvine’s Paul Merage School of Business. Based on his research, Schwarz pointed out that Robinhood’s business model over the past year has relied on bringing a steady stream of first-time traders into the markets.

Added to that, Schwarz recently co-authored a study for the Journal of Finance that found the way information is displayed in the Robinhood app affects user purchasing, driving new investors to herd into assets after their prices rise. It can ultimately lead to negative returns.

“That's an unsustainable business model because, basically, you need the same group of people who continuously believe that one of these times it's going to work, or alternatively, you need fresh, new people to come in and play the game," Schwarz told Yahoo Finance. "And there's probably a finite number of people that are willing to do that."

Odds on dogecoin

Through Nov. 21, Robinhood is giving Burger King’s most loyal customers odds to win free cryptocurrency. Burger King customers who sign up for the restaurant's BK Royal Perks loyalty program have the chance to win doge, ethereum and bitcoin after making a Burger King purchase of $5 or more.

At 1:1 odds, the sweepstakes is heavily stacked in favor of giving participants free dogecoin while prizes last. The chance of actually winning ether or bitcoin is far lower, at a respective odds of 1 out of 10,000 and 1 out of 100,000.

Apart from its value adding up to less than a dollar, this majority dogecoin sweepstakes plays into the profits Robinhood already booked from listing the asset.

Over the past year, the price of Dogecoin spurred more downloads of Robinhood's mobile app according to data from Apptobia and Yahoo. In Q2 2021, 62% of Robinhood’s revenue from crypto came from customers trading dogecoin, but the company reported a sharp drop in crypto trading for the third quarter. The platforms application downloads

Meanwhile, many Robinhood customers have moved onto the new dog meme-themed shiba inu coin (SHIB-USD), and are demanding the company offer it to trade showed major demand for the company to add a new dog-themed cryptocurrency. The dogecoin derivative gained 82% in value over the past week, outpacing dogecoin, with Robinhood capturing none of the frenzy.

Robinhood's Q3 revenue was up 35% to $364.9 million, compared to $270 million in Q3 2020. However, its drop below Wall Street estimates of $423.9 million still has some analysts wondering what revenues from a normalized level of trading on the platform is supposed to look like.

“Where are people going to engage whether it's in equities or crypto? What does that imply for activity, new user account growth and longer term, the story around the development of other products and services,” JMP Securities analyst Devin Ryan told Yahoo Finance last week after the HOOD earnings call. “Trading is important today … but the bigger picture here is what type of connectivity do they get launching new products,” Ryan said.

While Robinhood customers want the platform to add new cryptocurrencies like SHIB, the company is actively developing new crypto features such as a much-anticipated crypto wallet service in addition to 24/7 phone support.

“We’re aiming to deliver great new crypto features for customers while being mindful of keeping our platform safe and introducing products that comply with legal and regulatory requirements,” Robinhood's CEO Vlad Tenev told investors last week during the company’s earnings call. Tenev admitted that for crypto “the regulatory landscape is uncertain.”

Robinhood's crypto play for retail investors

Pablo Batista, 26, supports himself by actively trading stocks and cryptocurrencies full time. “They are kind of late to be working on [crypto wallets] so I feel like that’s definitely hurt the confidence of their user base,” he told Yahoo Finance.

When the pandemic ended his tenure as a line cook in a Manhattan restaurant, Batista originally bought his first cryptocurrencies through Robinhood. In February, he switched to using Coinbase and online brokerage WeBull because Robinhood didn't have a crypto wallet service or the more technical market data he wanted.

“I think the Robinhood interface is definitely beginner-friendly but in terms of crypto the main issue was transferring assets off the platform,” said Batista.

On the other hand, 31-year-old Mark Mulloy, another full-time investor who's been a Robinhood customer since 2015, said he's tried several other crypto exchanges and stock brokerage services like Coinbase, Crypto.com, TD Ameritrade and Fidelity, but likes Robinhood best.

"I came for the zero-commission trading, I stayed for its user-friendly interface and efficiency for executing orders, and I just feel like a lot of those other platforms make you jump through all these extra hoops to withdraw your money," Mulloy told Yahoo Finance.

David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.

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