Author: BlockBeats

TL;DR
After its launch, the prediction market exchange Rothera, co-invested by Robinhood and SIG, quickly entered the global top five, generating approximately $170 million in revenue within the first 41 days of operation, which annualizes to about $150 million.
Goldman Sachs predicts that Rothera will contribute $307 million in revenue by 2027, accounting for 5% of Robinhood's total revenue; this proportion may rise to 6% by 2028.
Rothera's competitiveness stems from Robinhood's approximately 14 million monthly active users, SIG's market-making capabilities, and significantly lower retail rates compared to other prediction market exchanges.
Goldman Sachs estimates that Robinhood's revenue from prediction markets will reach $943 million and $1.15 billion in 2027 and 2028, respectively, exceeding market consensus by 10% and 14%.
Rothera explains part of Robinhood's current high valuation, but even without this business, the valuation of Robinhood's other businesses remains historically high.

Entering the Global Top Five Within Months

Robinhood is gradually upgrading the prediction market from a rapidly growing brokerage business to a trading infrastructure controlled by its own participation.

Goldman Sachs highlighted Rothera in its latest report. It is a prediction market exchange in which Robinhood, Susquehanna International Group (SIG), and MIAX hold 45%, 45%, and 10% stakes, respectively. Robinhood is the controlling party and will incorporate all revenues and expenses of Rothera into its financial statements, distributing 55% of net profits to other shareholders through non-controlling interests.

This means that all income generated by Rothera will be reflected in Robinhood's revenue, but ultimately only 45% of net profits belong to Robinhood shareholders. Understanding this accounting relationship is key to assessing Rothera's actual contribution.

Caption: Robinhood consolidates all revenues and expenses of Rothera, but only 45% of net profit belongs to Robinhood.

Since its launch in late May 2026, Rothera has rapidly increased its volume. In the first 41 days of operation, Rothera achieved approximately $17 million in revenue, equal to an annualized revenue of about $150 million, and Goldman Sachs estimates its pre-tax profit margin has reached 45%.

The growth in trading volume is even more intuitive. Rothera completed about 2 million contract trades in May, quickly rising to 2.09 billion in June, approximately 1.688 billion in July, and then dropping to 593 million in August.

Rothera launched in May 2026, with contract trading volume exceeding 2 billion in June, followed by a decline.

In terms of nominal trading volume, Rothera became the third-largest designated contract market for prediction markets globally in July 2026, ranking fifth in August, along with platforms like Kalshi, Polymarket, Crypto.com, and Opinion that make up the top tier.

In terms of nominal trading volume, Rothera ranks third and fifth globally in July and August 2026, respectively.

However, Rothera is still in the early stages of expansion. Its nominal trading volume share fell from about 3% in July to about 1% in August, and trading volume and ranking can be easily affected by sports event schedules, trending topics, and market cycles. Entering the global top five in a short period demonstrates Robinhood's ability to drive traffic but is insufficient to confirm a stable market position.

Initially, Rothera primarily offered contracts on sports events, and it was not until August 2026 that it began to add political and economic products, with both types of contracts accounting for about 1% of trading volume that month. This indicates that Rothera's current activity is still highly reliant on the sports market, and product diversification has only just begun.

For Robinhood, Rothera's importance also lies in the change of business model. Previously, Robinhood primarily operated as a futures commission merchant (FCM), providing prediction market trading for clients and routing orders to designated contract markets like Kalshi and ForecastEx. Robinhood charged brokerage fees, while external exchanges charged matching and settlement fees.

After Rothera's launch, Robinhood can participate in both brokerage and exchange phases, retaining some revenue that would otherwise flow to external platforms within its own system. Thus, prediction markets are no longer just a trading product for retail clients but also start to serve as an entry point for Robinhood's expansion into trading infrastructure.

How Do Low Rates Drive Liquidity?

Whether prediction markets can scale depends crucially on liquidity. Compared to stock markets, prediction markets have a large number of contracts on various topics, outcomes, and timelines, making it easier for trading volume to become dispersed. If there are insufficient buyers and sellers, spreads will widen, user experience will decline, and market activity will further weaken.

Goldman Sachs believes that Rothera has two relatively difficult-to-replicate sources of liquidity.

The first source is Robinhood's retail clients. As of the report's release, Robinhood had approximately 14 million monthly active users. As more prediction market orders are directed towards Rothera, these clients can continuously provide retail flow to the exchange.

The second source is SIG's market-making capability. SIG is not only a large global market maker but also holds 45% of Rothera, therefore it has the incentive to continuously provide quotes and liquidity to the platform. Robinhood supplies retail orders, and SIG is responsible for absorbing and matching liquidity; this combination forms the foundation for Rothera's early expansion.

Low fees are another advantage that Rothera has in attracting more orders.

Goldman Sachs estimates that the transaction prices for most of Rothera's event contracts are concentrated around $0.25-$0.30 or the symmetric $0.70-$0.75 range. Based on its dynamic pricing model, the average fee rate for retail takers at the exchange level is approximately 0.38%-0.42% per $1 nominal contract, significantly lower than the 1.17%-1.31% levels of other major prediction market exchanges.

Goldman Sachs estimates that among major prediction market DCMs, Rothera offers the lowest average fee for retail traders.

Rothera does not adopt a uniform rate but rather a dynamic model linked to contract prices and trader types. The closer the contract price is to $0 or $1, the lower the trading fees; the closer it is to $0.50, the relatively higher the rates. Professional trading firms and market makers also pay higher fees than ordinary retail clients.

The purpose of this pricing strategy is to lower participation costs for retail clients while charging higher fees to professional institutions to support platform liquidity.

Robinhood also adjusted its prediction market fee model after Rothera's launch. Previously, clients needed to pay about 2% in fixed total fee rates; after adopting floating pricing and routing part of the orders to Rothera, Goldman Sachs estimates the average total fee paid by clients has dropped to 1.31%-1.42%, which amounts to savings of about 29%-34%.

After adopting floating pricing and routing orders to Rothera, Robinhood clients' total fee rate is expected to drop from 2% to 1.31%-1.42%.

For Robinhood, a decrease in client rates does not necessarily mean a corresponding decrease in platform revenue. Since the company receives both brokerage fees and exchange fees from Rothera, Goldman Sachs estimates that, before deducting non-controlling interests, Robinhood’s nominal total charging rate may have increased from about 1.25% to 1.31%-1.42%.

However, only 45% of Rothera's net profit belongs to Robinhood. After accounting for the non-controlling interests distributed to other shareholders, Goldman Sachs estimates Robinhood's effective prediction market charging rate is about 1.11%-1.19%, slightly lower than the previous rate of about 1.25%.

Therefore, the value of this model primarily comes from long-term scale rather than an immediate increase in effective rates. Robinhood is essentially using a portion of short-term profits to obtain lower client costs, greater trading volumes, and stronger control over trading infrastructure.

Currently, Rothera only has Robinhood as the FCM connected. If low rates can attract other brokers to join, the exchange could obtain orders outside the Robinhood ecosystem, forming a cycle of "low rates - more flow - deeper liquidity." However, until external brokers connect on a large scale, Rothera remains highly reliant on internal traffic from Robinhood.

How Much Revenue Can the Prediction Market Contribute to Robinhood?

Goldman Sachs predicts that Rothera's revenue will grow from $87 million in 2026 to $307 million in 2027, and further to $444 million in 2028, accounting for 2%, 5%, and 6% of Robinhood's total revenue during the same periods.

In the same period, Rothera's net profit attributable to Robinhood is expected to be $14 million, $58 million, and $94 million, respectively. As early investments decrease and revenue scales increase, the fixed cost leverage of the exchange business is expected to be released. Goldman Sachs believes that its profit margin may align in the long term with the levels of mature derivatives exchanges, approximately 55%-70%.

Rothera is just one part of Robinhood's prediction market business. In addition to exchange revenue, the company will also obtain prediction market income from the brokerage side. Goldman Sachs estimates that Robinhood's total net income from prediction markets will reach $657 million in 2026, increase to $943 million in 2027, and reach $1.15 billion in 2028, accounting for 12%, 14%, and 15% of the company’s total revenue.

The share of Rothera in Robinhood's prediction market revenue is expected to rise from about 13% in 2026 to 33% in 2027, and further to 39% in 2028. This means Rothera will gradually transform from a supplementary income source within the prediction market business to an important component of it.

The prediction market is also the main reason why Goldman Sachs' revenue expectations for Robinhood are higher than market consensus. Goldman Sachs' forecasts for prediction market revenues from 2026 to 2028 exceed market consensus by 4%, 10%, and 14%, while overall revenue projections are higher by 2%, 3%, and 3%, respectively.

Goldman Sachs estimates that Robinhood's net income from prediction markets in 2027 and 2028 will exceed market consensus by 10% and 14%, respectively, but the income advantage does not fully translate into EPS advantage.

However, the upward revision of prediction market revenue has not fully transmitted to earnings per share. Goldman Sachs' revised estimates for Robinhood's earnings per share in 2027 are largely in line with market consensus, and in 2028 even slightly below consensus by about 1%. This indicates that aside from revenue growth, allocations of non-controlling interests, product investment, and cost structure will still affect the ultimate shareholder returns.

In the future, Rothera may also enter into trading products on other exchanges. Goldman Sachs specifically mentioned perpetual futures, believing that its exchange license could provide space for product diversification. However, this part is currently closer to a potential option and is not suitable for direct inclusion in certain income. Whether related products can be launched still depends on regulatory approvals, market demand, and specific execution progress.

Maximum Valuation of $19.5 Billion, What Is Needed for an Optimistic Scenario?

Goldman Sachs conducted a sensitivity analysis of Rothera's 2027 revenue, profit, and potential value under three scenarios: baseline, optimistic, and pessimistic.

In the baseline scenario, Goldman Sachs anticipates Rothera's revenue to reach $307 million in 2027, with a net profit of approximately $129 million, of which around $58 million belongs to Robinhood. Correspondingly, the overall equity value of Rothera is about $5.1 billion to $5.4 billion, with the value attributable to Robinhood at about $2.3 billion to $2.5 billion, equivalent to $2.50 to $2.69 per share.

In an optimistic scenario, Rothera's revenue in 2027 could reach between $359 million and $906 million, with net profit attributable to Robinhood at approximately $71 million to $195 million, corresponding to an overall equity value of $6.7 billion to $19.5 billion, and a value attributable to Robinhood of about $3 billion to $8.8 billion, equivalent to $3.30 to $9.64 per share.

In a pessimistic scenario, Rothera's revenue in 2027 could be only between $91 million and $242 million, with net profit attributable to Robinhood at approximately $15 million to $44 million, corresponding to an overall equity value of $1 billion to $3.6 billion, and a value attributable to Robinhood of about $500 million to $1.6 billion, equivalent to $0.52 to $1.76 per share.

Under different growth scenarios, Goldman Sachs estimates the overall equity value of Rothera to be around $1 billion to $19.5 billion; the value attributable to Robinhood is estimated at about $500 million to $8.8 billion.

Goldman Sachs merges the total betting revenue of prediction markets and online sports betting into potential markets, as there is a high overlap between the two types of products. Its estimates show that the combined revenue pool for both in 2026 has an annualized scale of about $18 billion, and could grow to $20 billion-$21 billion in 2027.

Within this market range, Rothera’s baseline scenario corresponds to about a 1.5% revenue share; the optimistic scenario is about 1.7%-4.2%; and the pessimistic scenario is 0.5%-1.2%.

A maximum valuation of $19.5 billion implies quite aggressive growth assumptions: Rothera's revenue in 2027 needs to reach $906 million, a 946% year-on-year increase; Robinhood needs to continue bringing in a large number of orders to the platform, SIG needs to maintain market-making support, more external FCMs also need to join, and the product range must expand from sports contracts to political, economic, and other derivatives.

This also explains why Goldman Sachs’ valuation range is so wide. The value of Rothera not only depends on the overall growth of prediction markets but also on its ability to transform from an internal trading venue of Robinhood into an independent infrastructure that can attract other brokers and traders.

Rothera can also partially explain Robinhood's current high valuation. Robinhood’s current forward P/E ratio according to Goldman Sachs' forecast for FY+2 is about 39.3 times, placing it at the 87th percentile of the company’s valuation range over the past five years, indicating that the market has already factored in high growth expectations.

After excluding Rothera's value attributable to Robinhood, the remaining businesses correspond to P/E ratios of about 39.2-39.3 times in the baseline scenario; declining to 37.0-38.9 times in the optimistic scenario; and around 39.6-39.8 times in the pessimistic scenario.

This does not mean that Robinhood's remaining businesses are necessarily cheap. Even in the baseline scenario, the valuation of the remaining businesses is still at the 87th percentile historically and significantly higher than the average levels of brokerages and crypto asset-related companies. Goldman Sachs is willing to accept this premium primarily based on Robinhood's anticipated 22% revenue growth from 2026 to 2028 and the company’s rapid product rollout.

Rothera provides a new support for Robinhood's valuation, but its investment logic remains founded on the premise of sustained high growth. Whether trading volumes can be maintained, whether external brokers will be willing to join, whether non-sports contracts can scale, and whether regulations allow for continued product expansion will all determine which end of the $1 billion to $19.5 billion valuation range Rothera ultimately falls into.

What can be confirmed for now is that the prediction market has gradually transformed from a new product of Robinhood to an important variable affecting its revenue expectations and valuation framework. Whether Rothera can convert short-term trading enthusiasm into a stable liquidity network will be crucial for the viability of Robinhood's next phase of growth narrative.

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