Robinhood Markets, Inc. (HOOD) shares jumped Wednesday after the company announced plans to launch a futures and derivatives exchange through a joint venture, significantly expanding its footprint in prediction markets.

The brokerage revealed it will introduce both an exchange and clearinghouse, with Robinhood serving as the controlling partner in the arrangement. This marks a notable escalation of the company's commitment to prediction-market infrastructure.

Building Out Market Infrastructure

Susquehanna International Group will step in as the day-one liquidity provider, with additional liquidity firms anticipated to join the platform. That's crucial because prediction markets are still relatively young, with contracts that shift constantly, making it tough to maintain deep and consistent liquidity.

What Goldman Sees in the Deal

Goldman Sachs analyst James Yaro maintained his Buy rating on Robinhood (HOOD) with a $175 price target, calling the proposed exchange venture a potentially major catalyst for scaling and monetizing prediction markets.

According to Yaro, the joint venture offers two key advantages. First, operating as a designated contract market (DCM) would give Robinhood the authority to design and list customized contracts tailored for clients. Second, partnering with SIG is fundamentally about injecting liquidity into prediction markets, addressing one of the category's biggest challenges.

The analyst noted that this structure gives Robinhood much more control over which contracts appear on the new DCM. That enhanced oversight could deliver better liquidity across more markets compared to Robinhood's current prediction venues.

Dual Revenue Opportunities

Here's where it gets interesting for Robinhood's business model: the company could capture economics through both its brokerage and futures commission merchant (FCM) operations and through the exchange joint venture itself. That's two separate revenue streams from the same underlying activity.

Yaro added that MIAXdx's existing licenses and products should help contain the venture's incremental investment requirements, though Robinhood hasn't yet disclosed specific spending figures.

The Risks Worth Watching

Despite his optimistic stance, Yaro flagged potential headwinds including softer retail engagement and possible slowdowns in net interest income growth. He also pointed to pressure from declining interest rates, which could weigh on Robinhood's revenue trajectory.

HOOD shares climbed 8.55% to $125.50 on Wednesday following the announcement.