Blockchain.com, Binance US join prediction market race as crypto trading slows

Binance US and Blockchain.com are the latest contenders looking to enter the U.S. prediction market industry and has reportedly applied for regulatory approval to offer event contracts.

Summary

• Binance US has reportedly applied for regulatory approval to offer prediction markets in the United States.
• Coinbase, Crypto.com, Gemini and Bullish are among the cryptocurrency companies pursuing prediction markets through regulatory applications, partnerships or their own trading platforms.
• Crypto exchanges are expanding their product offerings as falling cryptocurrency prices and weaker trading activity put pressure on revenue from traditional digital asset services.
• Regulatory disputes remain a concern for prediction market operators, with Michigan regulators saying Coinbase has agreed to stop offering event contracts to customers in the state.

According to a Financial Times report citing a person familiar with the matter, British cryptocurrency company Blockchain.com applied for a US license last week to offer regulated event contracts, while Binance US recently submitted its own application.

Both companies are joining an increasingly crowded market where established exchanges, including Coinbase, Crypto.com and Gemini, are introducing prediction products or working with existing operators to offer customers more trading options.

The applications come as prediction market activity continues to grow despite a prolonged downturn in cryptocurrency prices, with traders increasingly placing bets on sporting events, political outcomes, economic decisions and other real-world developments.

Blockchain.com and Binance US pursue prediction market approvals

Blockchain.com chief executive Peter Smith told the Financial Times that the rapid growth of prediction markets reminded him of cryptocurrency trading during its early years.

Smith said customers wanted access to prediction markets alongside their existing digital asset holdings, prompting the company to pursue regulatory approval in the United States.

Binance US has taken a similar route, although neither company's application amounts to authorization to begin offering the products.

The American exchange had already been considering prediction markets as part of its business expansion. As crypto.news reported on October 15, Binance US was reportedly looking to raise up to $100 million at a valuation near $1 billion, with new products and expanded US operations among its plans.

Meanwhile, Bullish has applied for a US license covering prediction markets, while Coinbase has partnered with Kalshi to make event contracts available through its trading platform.

Companies entering the sector are pursuing different business models, with some developing their own prediction market operations and others relying on partnerships with regulated exchanges to provide contracts to customers.

Prediction markets see an uptick in popularity

According to figures cited by the Financial Times, combined trading volumes on Polymarket and Kalshi rose from $17 billion in January to $72 billion in September, an increase of more than 300%.

Over the same period, spot cryptocurrency trading volumes fell 18%, while the prices of several major digital assets remained well below their levels from a year earlier.

Bitcoin and Ethereum had declined 28% and 42%, respectively, over the previous 12 months, while XRP and Solana had lost roughly half their value, according to the report.

Publicly traded cryptocurrency companies have faced similar pressure. Shares of Coinbase and Bullish have nearly halved over the past year, while Gemini has lost 82% of its market value.

Patrick Moley, senior research analyst at Piper Sandler, said retail trading platforms were expanding their product offerings to retain existing customers and attract new users during periods of weaker cryptocurrency activity.

Moley said offering products outside cryptocurrencies could help exchanges maintain business during a prolonged market downturn.

Robinhood's financial results have already provided an example of how event contracts can contribute to trading revenue. During the second quarter, the brokerage generated $156 million from event contracts, compared with $100 million from cryptocurrency transactions, which declined 38% from a year earlier.

Crypto.com expands prediction markets through Robinhood deal

Crypto.com has pursued a different approach by separating its prediction market business, OG.com, into an independent entity and establishing partnerships to distribute its contracts.

In September, Robinhood agreed to acquire stakes in Crypto.com and OG.com under a multiyear arrangement that would allow selected event contracts to reach eligible American customers through Robinhood's platform.

The agreement valued Crypto.com at $20 billion and OG.com at $5 billion for the purposes of the equity transactions.

Robinhood had previously relied on other prediction market providers, and the agreement gave the brokerage another source of event contracts as demand for the products continued to grow.

According to the Financial Times, one cryptocurrency industry executive said companies were concerned that generating revenue exclusively from digital asset trading might no longer provide the same business opportunities as before.

Prediction markets remain under regulatory scrutiny

Despite growing demand, cryptocurrency exchanges entering prediction markets are facing legal disputes over whether certain event contracts should fall under federal derivatives regulations or state gambling laws.

Michigan regulators said this month that Coinbase had agreed to stop offering event contracts to customers in the state.

The exchange had previously challenged Michigan's authority over sports-related prediction markets, but a federal judge denied its request for preliminary protection against state enforcement in August.

US District Judge Shalina Kumar found that Coinbase had not demonstrated sufficient grounds for the requested injunction. The decision concerned preliminary relief and did not settle the underlying legal dispute.

Similar disagreements have affected Kalshi and other prediction market operators, with federal and state authorities contesting how sports event contracts should be regulated.

Outside the United States, retail prediction markets remain prohibited in the United Kingdom, where authorities classify the products as binary options.