Coinbase rolled out prediction markets to US users on January 28, enabling trading on elections, sports, and economic events through regulated partner Kalshi.
The launch arrives as Kalshi confronts cease-and-desist orders and lawsuits across nine states, with regulators claiming the $11 billion company operates illegal sports wagering without proper gaming licenses.
Users can trade yes-or-no contracts on real-world outcomes starting at $1 in USD or USDC.
Coinbase acts as distribution platform while Kalshi provides contracts and settlement infrastructure through a revenue-sharing arrangement similar to its earlier partnership with Robinhood.
What Happened
Coinbase announced prediction market availability through its main app, allowing customers to manage positions alongside existing crypto, stock, and cash holdings.
The integration follows December's announcement at Coinbase's "System Update" event promoting the company's vision as an "everything exchange."
Contract prices range from $0 to $1, representing market-implied probability of specific outcomes. Winning contracts settle at $1 while losing positions expire worthless.
The services operate through Coinbase Financial Markets, a Commodity Futures Trading Commission-registered entity and National Futures Association member. Kalshi received federal approval as a designated contract market but faces mounting state-level opposition.
Read also: Bitcoin Holds Critical Support As 22% Of Supply Trades Underwater
Regulatory Pressure Builds
Massachusetts attorney general Andrea Campbell filed suit against Kalshi on December 9, alleging violations of state gaming laws. Nevada courts rejected the company's request to stay enforcement actions on December 16, allowing state regulators to proceed with cease-and-desist orders.
Kalshi is pursuing appeals at the US Court of Appeals for the Ninth Circuit. The company's sports betting contracts have drawn particular scrutiny from state gaming commissions questioning whether prediction markets constitute gambling under existing frameworks.
The CFTC issued no-action letters to four prediction market operators including Polymarket on December 11, exempting them from certain swap reporting requirements. Those letters did not address Kalshi's state-level legal challenges.
Why It Matters
Coinbase's launch timing reflects strategic urgency to diversify revenue as cryptocurrency trading volumes declined 23% over three months. Bitcoin (BTC) fell from October highs above $100,000 to around $89,000 in late January.
Prediction markets generated approximately $4 billion in weekly trading volume in December, according to Dune Analytics. Platforms like Polymarket and Kalshi attracted mainstream attention during the 2024 election cycle, prompting established financial firms to enter the space.
Robinhood announced plans to launch its own proprietary prediction market in 2026, potentially ending its Kalshi distribution partnership. The competitive dynamics could pressure Coinbase and Kalshi to resolve regulatory uncertainties quickly or risk losing market share.
Read next: How Former Biotech AlphaTON Pivoted To AI Infrastructure And TON Blockchain Strategy