Buying and selling venues Robinhood (HOOD) and Coinbase (COIN) may emerge as the principle public-market beneficiaries of the speedy rise in prediction markets, in accordance with a brand new report from Cantor Fitzgerald.
The report argues that whereas main platforms like Kalshi and Polymarket stay personal, listed firms are already tapping into the pattern by integrating event-based buying and selling into their apps.
These markets let customers purchase contracts tied to real-world outcomes, from elections to financial information, with costs reflecting the group’s view of chance.
“Prediction markets have exploded onto the scene,” Cantor Fitzgerald analyst Ramsey El-Assal wrote, noting that contract volumes are anticipated to proceed their “spectacular current development pattern.”
For corporations like Robinhood and Coinbase, the enchantment is simple. Prediction markets generate income by way of buying and selling exercise, not by taking the opposite aspect of bets. That mannequin mirrors equities and crypto buying and selling, the place each firms already function at scale.
Robinhood, particularly, has seen sturdy early traction. The corporate launched its prediction markets hub following the 2024 U.S. election cycle, and the product shortly turned one in every of its fastest-growing enterprise traces by income. Since launch, customers have traded billions of contracts tied to sports activities, politics and macro occasions.
Coinbase has taken an analogous method however is earlier in its rollout. Its prediction market providing, powered by Kalshi’s infrastructure, is now accessible throughout its person base. Whereas nonetheless in its early levels, the product spans classes similar to crypto, economics and international occasions.
Cantor frames the chance as a perform of scale. Platforms with massive retail audiences and current buying and selling infrastructure have a built-in benefit, permitting them to drive liquidity and participation shortly.
The report additionally pushes again on the concept that prediction markets are merely playing. “A typical misunderstanding about prediction markets is that they’re playing platforms in disguise,” it stated. As an alternative, customers “commerce in opposition to different individuals by shopping for contracts they consider are ‘underpriced’ and promoting ‘overpriced’ contracts,” just like equities markets.
That construction means platforms earn charges from exercise, not losses. Costs replace in actual time as new data enters the market, creating what the report describes as “constantly up to date forecasts” pushed by monetary incentives.
Past retail use, Cantor sees longer-term purposes in hedging and forecasting. “Prediction markets will emerge as a flexible device for institutional buyers,” the report stated, pointing to potential use in danger administration and macro hedging.
Nonetheless, regulation stays the important thing uncertainty. The report describes the present setting as “messy,” with federal and state authorities break up on whether or not prediction markets fall beneath derivatives legislation or playing guidelines.
Cantor’s backside line is that prediction markets are unlikely to fade. Because the regulatory image turns into clearer, corporations with massive person bases and robust distribution, similar to Robinhood and Coinbase, may very well be in the perfect place to capitalize.