Coinbase Joins With Kalshi to Enter the Surging Prediction-Markets Business — WSJ
By Vicky Ge HuangCoinbase Global is getting into prediction markets in a bid to become a one-stop exchange for Americans' trading needs, the latest sign that tech platforms offering wagers on real-world events are finding their way into every corner of Wall Street.The company has struck a partnership with prediction-markets specialist Kalshi that will allow Coinbase investors to trade on the outcomes of sports games, elections and economic indicators, using the yes-or-no bets that have come to define prediction markets. In the months to come, the exchange plans to offer contracts provided by other prediction platforms.Coinbase is expanding outside of crypto to become an "everything exchange," much as rival Robinhood Markets has evolved beyond its core stock-brokerage business. They, and a handful of other firms with roots in either crypto or traditional markets, are intent on emerging as the Amazon.com of consumer financial services."The everything exchange is our vision where users will be able to trade every asset, 24/7, from anywhere in the world on one trusted platform that starts with crypto," said Max Branzburg, vice president of product management at Coinbase. "We believe that having all of this in one platform will enable more efficiency, more access and better outcomes for customers."Coinbase is also rolling out artificial-intelligence-powered financial advice and zero-commission stock trading, and it expects to introduce tokenized stocks early next year. The company said investors can place prediction bets with U.S. dollars or USDC, the stablecoin issued by Circle Internet Group.Coinbase and Robinhood, which also has a partnership with Kalshi, aren't the only financial firms that have sought to embed prediction markets into their offerings. The businesses began to win mainstream acceptance after they correctly called the 2024 presidential election, and a federal-court ruling legalized such election bets in the U.S.Kalshi recently raised $1 billion from venture-capital firms, including Sequoia and Andreessen Horowitz, at a $11 billion valuation. Meanwhile, Polymarket struck a deal with New York Stock Exchange owner Intercontinental Exchange, which said it would invest up to $2 billion in the crypto-based prediction market, giving it a valuation of roughly $8 billion.The space has also seen a significant influx of major players this year. Gemini, the crypto exchange founded by the Winklevoss twins, recently secured a license from the Commodity Futures Trading Commission to offer prediction markets to U.S. customers.President Trump's media business also said it would introduce prediction markets on his social-media platform Truth Social through a partnership with the exchange Crypto.com.Flutter Entertainment's FanDuel, a sports-betting platform, is also launching a prediction market. CNN, the media network, recently partnered with Kalshi.And Robinhood is pushing further into prediction markets with plans to open a futures and derivatives exchange with market maker Susquehanna International Group to offer additional contracts tied to sports, elections and other events.Critics argue that prediction markets are a high-risk — and lightly regulated — form of gambling that is susceptible to insider trading and market manipulation. The financial incentives have sometimes fueled gambling addiction and encouraged users to bet on sensitive or unethical topics.In October, an unknown Polymarket trader earned more than $50,000 in profit by placing a last-minute, long-shot bet on a Venezuelan opposition leader winning the Nobel Peace Prize hours before the Norwegian Nobel Institute's announcement. The wager raised concerns about nonpublic information being used on prediction markets.Tarek Mansour, Kalshi's co-founder and chief executive, said prediction markets are structured in a way that minimizes the conflicts of interest present in gambling. "In gambling, there's a house, the house always wins, and the odds are set by the house," said Mansour. "In prediction markets, there's no house. There are no limits on how much people can win."Some individual investors are increasingly turning to prediction markets, noting that they offer a fairer playing field and more lucrative opportunities than traditional stock trading."Prediction markets are pretty new, and you don't have everybody on Wall Street trying to crack them," said Caleb Davies, a business analyst from Brooklyn Park, Minn., who trades on Kalshi. "There are a lot of opportunities for somebody like me to dig into some of these niche topics and just make a ton of money when the pros aren't really paying attention."Write to Vicky Ge Huang at [email protected]