HOOD predicts market business: the complete switching logic and revenue impact from Kalshi revenue sharing model to Rothera self operation. HOOD's predictive market (event contract) business has gone from being a "icing on the cake" to an important growth engine in the past year. After the Q1 data came out, the market's attention to this business has significantly increased, especially the pace of Rothera's self built JV exchange, which directly determines how much cake HOOD can eat in this track in the future. There are a few points we can talk about: 1、 Q1 Predict the Real Volume of Market Business HOOD Q1's total revenue was 1.067 billion US dollars, with the "Other (including forecast markets)" category contributing 147 million US dollars (close to the commonly referred 150 million in the market), accounting for approximately 13.7-14% of the total revenue, a significant increase of 320% year-on-year. Core data: 1) Q1 event contract trading volume: 8.8 billion copies (historical high) 2) In May alone, it reached 3.9 billion copies, with a significant acceleration compared to the previous month 3) This business is still mainly routed through Kalshi (and its JV with Susquehanna), with only some markets such as the World Cup and baseball starting to switch to Rothera The majority of this $147 million is predicted to contribute to the market. At the current pace, without switching modes, this business is likely to reach a scale of 500-600 million US dollars for the whole year. 2、 Old model: Sharing ratio with Kalshi This is the core of understanding subsequent changes. In Kalshi mode, the total cost per contract traded by the user is approximately 2 cents: Robinhood (broker) takes 1 cent; Kalshi (exchange) takes 1 cent; This is a typical "distributor model" - HOOD is only responsible for traffic diversion and front-end display, and it is Kalshi who really earns exchange fees. Early data validation: 1) In Q2 2025, HOOD traded approximately 1 billion contracts, corresponding to broker commission income of approximately $10 million, which perfectly fits the logic of 1 cent per contract. 2) Bernstein and other institutions estimated early on that HOOD predicted a market ARR of approximately 300 million US dollars, which was also calculated under this profit sharing ratio. Conclusion: Under the old model, HOOD's take rate was severely suppressed, receiving only 50% of the total expenses. 3、 The rhythm of Rothera replacement Rothera is a joint venture between HOOD and SI, which has acquired MIAXdx and obtained a CFTC licensed exchange and clearing house license. 1) Partial routing has already begun: World Cup contracts and some professional baseball contracts have been switched to Rothera, while the majority of the rest of the market still follows Kalshi 2) HOOD's official statement is "gradual migration", and the CFO also mentioned during the financial report that "most of the traffic will eventually move to Rothera" 3) Q2-Q3 is expected to be an accelerated transition period, with a high probability of completing most of the migrations by the end of 2026 Replacement is not a one size fits all approach, but rather a gradual process based on market types (starting with major sports events and then expanding to other categories). This is also why Q1 is still the main Kalshi mode. 4、 What changes will occur in the business model and revenue after the complete replacement is completed? This is the most crucial part. 1. Business model upgraded from "distributor" to "infrastructure owner" 1) Old model: HOOD is Kalshi's traffic entry point, which needs to be divided with the exchange. 2) New model: HOOD has its own exchange and clearing capabilities through Rothera JV, while continuing to work as a front-end broker. This brings about two core changes: 1) The pricing and product rights are completely in one's own hands (one can decide what contract to enter into, how to price, and how to design the experience). 2) No longer need to transfer exchange fees to third parties. 2. Changes in revenue model (most substantial improvement) After a complete switch, HOOD's revenue structure will become: 1) Brokerage commission (directly collected by Robinhood): still charged according to the new rules, with a maximum cap of about 1 cent per contract (changed to a probability weighted formula after June, with Gold users receiving lower fees). 2) Exchange fees+JV profits: The 1 cent originally given to Kalshi will now mostly remain in Rothera JV, and HOOD as a JV shareholder can receive a large proportion. Net effect: The revenue from a single contract has increased from 1 cent to nearly 2 cents or even higher (depending on the JV's share ratio and final pricing strategy). The CFO himself has made it very clear: We will take most of the value and give a portion of the profits to users to make pricing more competitive. ” This means: 1) HOOD can lower the total cost of users compared to before (enhancing competitiveness and stimulating quantity). 2) At the same time, their take rate is actually higher (because they have eaten the portion originally given to Kalshi). Quantitative impact: 3) If all 8.8 billion contracts in Q1 are operated according to the new model, theoretically it is predicted that market revenue can significantly increase from the current revenue volume, coupled with natural growth in trading volume (which has accelerated significantly in May). Achieving a single quarter of over 300 million US dollars is a more realistic path. It is no longer impossible to predict that the market business will reach a scale of 1-1.5 billion US dollars for the whole year. 5、 Other positive changes In addition to pure revenue, there are several structural benefits: 1) better user experience (control of front-end and liquidity), which allows for faster launch of new categories and combination contracts. 2) The attractiveness of institutional traffic will also increase (SIG itself is a top market maker). In the long run, this business will shift from being driven by transaction volume to being driven by both infrastructure and transaction volume, resulting in a higher gross profit margin. Simply put, 1) HOOD predicts that the market business is undergoing a model upgrade from "traffic sharing" to "infrastructure self operation". Rothera has been replaced on a small scale and is expected to complete most of the migration within 2026. 2) After a complete switch, single contract revenue is expected to significantly increase, while also being able to feed back trading volume through better pricing. This business will become one of HOOD's core tracks for long-term high growth and high gross profit. For HOOD, Rothera is not simply "running its own exchange", but regaining control of the forecasting market, which was originally taken away by Kalshi with half of its profits. After completing this step, it is predicted that the strategic significance of HOOD in the market will rise to a large level. Non investment advice, for reference only This article is sponsored by @ bitget_zh, titled 'Bitget Buying US Stocks: Instant Entry, Smooth Trading'