Goldman Sachs is bullish on Robinhood: Rothera's highest valuation could reach 19.5 billion USD

Author: BlockBeats

TL;DR
The prediction market exchange Rothera, co-invested by Robinhood and SIG, quickly entered the global top five after its launch, generating approximately $150 million in annualized revenue in its first 41 days of operation.
Goldman Sachs estimates 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 comes from Robinhood's approximately 14 million monthly active users, SIG's market-making capabilities, and significantly lower retail fees compared to other prediction market exchanges.
Goldman Sachs expects Robinhood's prediction market revenue to reach $943 million and $1.15 billion in 2027 and 2028, respectively, exceeding market consensus by 10% and 14%.
Rothera can explain part of Robinhood's current high valuation, but even excluding this business, the valuation of Robinhood's remaining operations remains historically high.

Entering the Global Top Five Within Months of Launch

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

Goldman Sachs focused on Rothera in its latest report. This is a prediction market exchange with 45%, 45%, and 10% stakes held by Robinhood, Susquehanna International Group (SIG), and MIAX, respectively. Robinhood is the controlling party, thus incorporating all of Rothera's revenue and expenses into its financial statements, and then distributing 55% of the net profit to other shareholders through non-controlling interests.

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

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

Since its launch in late May 2026, Rothera has rapidly scaled up. In the first 41 days of operation, Rothera achieved approximately $17 million in revenue, equivalent to an annualized revenue of about $150 million, with Goldman Sachs estimating 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, which quickly surged to 2.09 billion in June, around 1.688 billion in July, and then fell back 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, alongside platforms like Kalshi, Polymarket, Crypto.com, and Opinion.

In terms of nominal trading volume, Rothera ranked third and fifth globally in July and August 2026, respectively, among prediction market DCMs.

However, Rothera is still in the early stages of expansion. Its nominal trading volume share dropped from about 3% in July to about 1% in August, and trading volume and rankings are also susceptible to the scheduling of sports events, popular incidents, and market cycles. The short-term entry into the global top five demonstrates Robinhood's ability to attract traffic, but it is not enough to confirm that it has established a stable market position.

Initially, Rothera offered almost exclusively sports event contracts, only starting to add political and economic products in August 2026, with both categories accounting for about 1% of trading volume that month. This indicates that Rothera's current activity still heavily relies on the sports market, and product diversification has just begun.

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

After Rothera's launch, Robinhood can participate in both brokerage and exchange roles, retaining some of the revenue that would have flowed to external platforms within its own system. Thus, the prediction market is no longer just a trading product for retail customers but also begins to serve as an entry point for Robinhood to extend into trading infrastructure.

How Do Low Fees Drive Liquidity?

Whether a prediction market can scale largely depends on liquidity. Compared to the stock market, prediction markets have a wide variety of contracts with different themes, outcomes, and durations, making trading volume more prone to dispersion. 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 customers. As of the report's release, Robinhood had approximately 14 million monthly active users. As more prediction market orders are directed to Rothera, these customers 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 a 45% stake in Rothera, thus having the motivation to continuously provide quotes and liquidity to the platform. Robinhood provides retail orders, while SIG takes on and matches liquidity, and the combination of the two forms the basis for Rothera's early expansion.

Low fees are another advantage for Rothera in attracting more orders.

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

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

Rothera does not adopt a uniform fee 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 rate. Professional trading firms and market makers also pay higher fees than ordinary retail customers.

The purpose of this pricing approach is to lower the participation cost for retail customers while charging higher fees to professional institutions to support platform liquidity.

Robinhood also adjusted its prediction market fee model after Rothera's launch. Previously, customers needed to pay a fixed total fee rate of about 2%; after adopting floating pricing and routing some orders to Rothera, Goldman Sachs estimates that the average total fee rate paid by customers has dropped to 1.31%-1.42%, equivalent to a saving of about 29%-34%.

After adopting floating pricing and routing orders to Rothera, the total fee rate paid by Robinhood customers is expected to decrease from 2% to 1.31%-1.42%.

For Robinhood, a decrease in customer fees does not necessarily mean a simultaneous decline in platform revenue. Since the company earns both brokerage fees and exchange fees from Rothera, Goldman Sachs estimates that before deducting non-controlling interests, Robinhood's nominal total fee rate may increase 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 that Robinhood's effective prediction market fee rate is about 1.11%-1.19%, slightly lower than the previous level 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 exchanging a portion of short-term revenue for lower customer costs, greater trading volume, and stronger control over trading infrastructure.

Currently, Rothera only has Robinhood as an FCM connected. If low fees can attract other brokerages to join, the exchange can obtain orders outside of the Robinhood ecosystem and form a cycle of "low fees - more flow - deeper liquidity." However, until external brokerages are onboarded on a large scale, Rothera still heavily relies on internal traffic from Robinhood.

How Much Revenue Can the Prediction Market Contribute to Robinhood?

Goldman Sachs estimates 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 period.

During 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 up, the fixed cost leverage of the exchange business is expected to be released. Goldman Sachs believes that its profit margin may long-term converge towards the level of mature derivatives exchanges, around 55%-70%.

Rothera is just a part of Robinhood's predictive market business. In addition to exchange revenue, the company will also generate predictive market revenue from the brokerage side. Goldman Sachs expects Robinhood's total predictive market net revenue to 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, respectively.

Among these, the proportion of Rothera in Robinhood's predictive market revenue is expected to rise from about 13% in 2026 to 33% in 2027, and further to 39% in 2028. This means that Rothera will gradually grow from a supplementary source of revenue in the predictive market business to an important component.

The predictive market is also the main reason Goldman Sachs has a higher revenue expectation for Robinhood than the market consensus. Goldman Sachs' forecasts for predictive market revenue from 2026 to 2028 are 4%, 10%, and 14% higher than the market consensus, while the total revenue forecasts for the same period are 2%, 3%, and 3% higher, respectively.

Goldman Sachs expects Robinhood's predictive market net revenue in 2027 and 2028 to be 10% and 14% higher than the market consensus, respectively, but the revenue advantage has not fully translated into EPS advantage.

However, the upward revision of predictive market revenue has not fully translated into earnings per share. Goldman Sachs' adjusted earnings per share forecast for Robinhood in 2027 is basically in line with the market consensus, and in 2028 it is even about 1% lower than the consensus. This indicates that in addition to revenue growth, non-controlling interest allocation, product investment, and cost structure will still affect the final shareholder returns.

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

Highest Valuation of $19.5 Billion, What is Needed for an Optimistic Scenario?

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

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

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

In the pessimistic scenario, Rothera's revenue in 2027 could only be $91 million to $242 million, with a net profit attributable to Robinhood of about $15 million to $44 million, corresponding to an overall equity value of $1 billion to $3.6 billion, with 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 Rothera's overall equity value to be about $1 billion to $19.5 billion; the value attributable to Robinhood is about $500 million to $8.8 billion.

Goldman Sachs combines the total betting revenue of the predictive market and online sports betting into a potential market, reasoning that there is a high overlap between the two types of products. Their estimates show that the combined revenue pool for both is about $18 billion annually in 2026, potentially growing to $20 billion to $21 billion in 2027.

Within this market scope, Rothera's baseline scenario corresponds to about 1.5% of the revenue share; the optimistic scenario is about 1.7% to 4.2%; the pessimistic scenario is about 0.5% to 1.2%.

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

This also explains why Goldman Sachs' valuation range is so wide. Rothera's value depends not only on the overall growth of the predictive market but also on whether it can transform from an internal trading venue of Robinhood into an independent infrastructure that can attract other brokerages and traders.

Rothera can also partly explain Robinhood's current high valuation. Robinhood currently corresponds to a forward-looking price-to-earnings ratio of about 39.3 times based on Goldman Sachs' FY+2 forecast, which is 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 the value attributable to Robinhood from Rothera, the remaining business corresponds to a forward-looking price-to-earnings ratio of about 39.2 to 39.3 times in the baseline scenario; it drops to 37.0 to 38.9 times in the optimistic scenario; and is about 39.6 to 39.8 times in the pessimistic scenario.

This does not mean that Robinhood's remaining business is cheap. Even under the baseline scenario, the valuation of the remaining business is still at the 87th percentile historically and significantly higher than the average level of brokerages and companies related to crypto assets. Goldman Sachs is willing to accept this premium mainly based on Robinhood's expected 22% revenue growth from 2026 to 2028 and the company's rapid product launch speed.

Rothera provides a new support for Robinhood's valuation, but its investment logic still relies on the basis of sustained high growth. Whether trading volume can be maintained, whether external brokerages are willing to join, whether non-sports contracts can achieve scale, and whether regulators will allow products to continue to expand will all determine which end of the $1 billion to $19.5 billion valuation range Rothera ultimately falls on.

What can be confirmed now is that the predictive market has gradually become an important variable affecting Robinhood's revenue expectations and valuation framework, evolving from a new product of Robinhood. Whether Rothera can convert short-term trading enthusiasm into a stable liquidity network will be key to whether Robinhood's next stage of growth narrative can hold.