Crypto exchanges expand into U.S. prediction markets amid token trading slump

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Crypto exchanges enter prediction markets

Highlights

Blockchain.com, Binance U.S., Bullish, and other crypto firms are seeking U.S. licenses to launch regulated prediction markets as diversification from spot crypto trading.
Prediction market trading volumes on Polymarket and Kalshi surged over 300 percent from $17bn in January to $72bn in September, while spot crypto trading volumes dropped 18 percent year-to-date.
Shares in Coinbase and Bullish have nearly halved in the past year, with Gemini down 82 percent, as regulatory disputes over gambling laws cloud prediction market expansion.

Licensing push and product expansion

As reported by Financial Times, British crypto firm Blockchain.com last week applied for a licence in the U.S. to offer regulated prediction markets to American customers, while Binance U.S. has also recently sought regulatory approval, according to a person with knowledge of the matter.

They join a wider move by digital asset groups including Coinbase, Crypto.com and Gemini, as exchanges look for new lines of business beyond spot crypto trading. Companies are either building their own prediction market products or working with established operators such as Polymarket and Kalshi.

Peter Smith, chief executive of Blockchain.com, said the rapid rise of prediction markets is reminiscent of crypto's early days, adding that the company's users want access to such products alongside their digital assets. Last month, Crypto.com spun out its prediction markets business, OG.com, into a separate entity and sold stakes in both companies to Robinhood as part of a partnership deal, while Bullish has applied for a U.S. licence and Coinbase partnered with Kalshi earlier this year.

Revenue pressure and regulatory risks

Prediction markets are gaining retail traction in the U.S. as traders bet on outcomes ranging from sports and elections to central bank decisions and weather events. The expansion comes during a prolonged crypto downturn, with bitcoin and ether down 28 per cent and 42 per cent respectively over the past year, while XRP and Solana have also fallen sharply.

Patrick Moley, senior research analyst at Piper Sandler, said retail-facing platforms are broadening their product suites to retain existing users and attract new traders, helping them manage periods of weak crypto activity. According to figures from specialist data provider The Block, trading volumes on Polymarket and Kalshi have risen more than 300 per cent since the start of the year, from $17bn in January to $72bn in September, while spot crypto trading volumes have fallen 18 per cent over the same period.

Pressure is also showing up in listed crypto-related equities. Shares in Coinbase and Bullish have nearly halved over the past year, and Gemini's share price has fallen 82 per cent. One crypto industry executive said many digital asset companies are concerned that making money solely from crypto may no longer be enough, pushing them toward markets where users can speculate on a far wider set of outcomes.

The strategy still carries legal risk. Prediction market operators are in disputes with some U.S. states over whether gambling laws apply to event contracts, and that pressure is extending to crypto groups entering the sector. The Michigan Gaming Control Board said this month that Coinbase agreed to stop providing event contracts to users in the state.

Our earlier article covered how CTOS Digital Bhd came under heavier pressure after a cybersecurity incident, as the stock slid to a new low amid concerns about service disruptions and longer-lasting damage to revenue and customer confidence. We noted that the company estimated the breach could cut this year’s net profit by RM12 million and revenue by RM16 million, with analysts warning that any extended disruption could further weigh on financial results and increase costs.

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