Cryptocurrency broker Coinbase Global (NASDAQ: COIN) said on Wednesday that it is entering prediction markets through a partnership with Kalshi, as was widely anticipated.
For a while now, there has been talk about Coinbase's prediction intentions, which picked up speed last week ahead of an event that took place earlier today. Event contracts are a part of the company's larger aims to go beyond cryptocurrencies and become an investor's one-stop shop for financial services, including with tokenized equities.
"Today, we’re taking a major new step toward becoming the Everything Exchange – dramatically expanding the assets available to trade on Coinbase, including novel cryptocurrencies, stocks¹, perpetual futures, and prediction markets,” said the California-based company.
With its introduction into prediction markets, Coinbase enters the yes/no derivatives market alongside competitors in cryptocurrency brokerage, such as Crypto.com and Gemini Space Station (NASDAQ: GEMI), as well as Robinhood Markets (NASDAQ: HOOD), a significant digital currency trading platform in and of itself.
Coinbase is a player in logical prediction markets
Because many of its customers are probably already trading yes/no contracts, placing sports bets, or doing both, Coinbase makes sense as a prediction markets entrant due in part to its prominence among retail cryptocurrency dealers. According to the company, among other things, its event contracts menu will cover sports, politics, finance, and culture.
Kalshi, which gains from the partnership as it works to strengthen its connections to the cryptocurrency world, will power such contracts. Kalshi has alliances with significant brokerage platforms like Webull and Robinhood in addition to Coinbase.
Coinbase highlighted simplicity while announcing its expanded asset selection and prediction market plans. Customers will be able to invest in political outcomes and sporting events in the same location that they buy equities and cryptocurrencies. It is also anticipated that the company would expand into prediction markets.
“A wider marketplace for predictions creates an avenue for more informed trading activity, and we plan to support contracts from additional prediction market platforms in the coming months,” notes Coinbase.
Robinhood is a winner, according to analysts
Coinbase and Robinhood are intensifying their competition by entering prediction markets. Actually, Coinbase's revelation came the day after its rival disclosed a big extension of event contracts, including football parlays and athlete props. According to some pundits, Robinhood will prevail.
“We expect a bigger percentage revenue benefit to HOOD vs. COIN given that the survey showed that users on that platform are more inclined to fund prediction markets portfolio with fresh money,” observe Mizuho analysts Dan Dolev and Alexander Jenkins.
They cite data from a Mizuho survey indicating 50% of Robinhood clients are likely to invest fresh capital into prediction markets while just 37% of Coinbase customers are expected to liquidate cryptocurrency positions to fund purchases of event contracts.
It's interesting to note that users of the trading apps are more likely to trade event contracts on political events (49%) and economic events (81%) than on sports (47%). This contradicts a number of data sources that show contracts for sporting events are the most commonly traded items on platforms like Kalshi.
