Something interesting is happening in the quiet corners of the crypto world. What once felt like a niche for betting on election outcomes or sports scores is quickly becoming much more. Prediction markets, those digital platforms where you stake a claim on a future event, are changing their stripes. They are turning into broad information trading venues, according to the sharp eyes at Bernstein, the research and brokerage firm.
- Prediction markets are evolving from niche betting platforms into broad information trading venues, attracting significant institutional investment and mainstream attention.
- Major players like Kalshi and Polymarket are converging on regulatory pathways, while platforms like Robinhood and Coinbase are integrating prediction markets, signaling a significant growth opportunity.
- Despite potential hurdles such as shallow liquidity and regulatory limitations, analysts see substantial growth potential, with key players receiving “outperform” ratings and ambitious price targets.
Think of it like this: instead of just guessing if a team will win, people are now trading on everything from economic indicators to corporate moves. Gautam Chhugani and his team at Bernstein put it plainly in a recent note to clients. They see these markets expanding well beyond their original scope. It’s a shift that could reshape how we think about information itself.
At its core, a prediction market is simple. You buy a “yes” or “no” contract on an event. If your prediction comes true, you get $1. If it doesn’t, you get $0. The price of that contract tells you what the market thinks the odds are. It is a direct, often brutal, measure of collective belief.
The real action, Bernstein points out, is playing out between two major players: Kalshi and Polymarket. These two platforms started from very different places. Yet, they are now finding common ground on new federal pathways. It is a fascinating study in convergence.
Kalshi took the regulation-first route. They built a centralized platform, secured key CFTC licenses, and even won a court battle to list political contracts. That sounds like a lot of paperwork, doesn’t it? But now, Kalshi is looking beyond the U.S. They are integrating with crypto and blockchain, partnering with names like Solana and Base. This move helps them tap into global markets and reach more people.
Polymarket, on the other hand, began decentralized. It was built on Polygon, a sidechain to Ethereum. It quickly grew into the largest global prediction venue. For a while, it seemed like the wild west, attracting users with its freedom. But the landscape shifts quickly in crypto.
Kalshi has actually pulled ahead in monthly trading volume since September. The Block’s data dashboard shows Kalshi hitting $4.4 billion compared to Polymarket’s $3 billion last month. That is a significant lead. Polymarket could not serve U.S. customers until recently. Now, with more regulatory clarity from the CFTC and SEC, it is preparing a KYC-compliant U.S. relaunch. They are doing this through a newly acquired clearing entity called QCEX. A POLY token launch is also in the works.
Both companies have attracted serious money this year. Kalshi secured $300 million from big names like Sequoia Capital and Andreessen Horowitz. Polymarket landed a $2 billion investment from ICE, the parent company of the NYSE. When institutional giants start pouring money into a sector, you know something big is brewing.
Even the NHL, a major U.S. sports league, has signed multiyear agreements with both Kalshi and Polymarket. This marks a first. It shows how these platforms are gaining mainstream acceptance, moving beyond just crypto enthusiasts.
The Robinhood Effect and Coinbase’s Vision
Bernstein also highlighted Robinhood’s rapid entry into this space. Robinhood acts as an anchor partner for Kalshi. It now lists over 1,000 prediction market contracts. This accounts for a whopping 57% of Kalshi’s October volume. That is a lot of activity flowing through one channel.
Robinhood logged $2.5 billion in prediction market volume last month alone. That is up from $2.3 billion for the entire third quarter. If this pace continues, it could mean an annual revenue run rate of $300 million for Robinhood. That is not pocket change. It shows how quickly these markets can generate significant business.
And it is not just Robinhood. Coinbase, another major player, plans to add prediction markets. This fits into its “everything exchange” vision. They want to cover crypto, tokenized equities, and stablecoins all in one place. Analysts expect a major announcement from Coinbase at its December 17 event. It seems everyone wants a piece of this evolving pie.
However, it is not all smooth sailing. Bernstein warns that prediction platforms still face risks. Some markets have shallow liquidity (meaning not enough buyers and sellers). User experience (UX) can be tricky, with complex order books. Narrow regulatory approvals could also limit how big they can get. It is a reminder that even promising new markets have hurdles to clear.
Mainstream bettors might still prefer the simplicity of traditional sportsbooks. This could keep prediction markets a niche product. That is, unless platforms like Robinhood can make event contracts feel normal for a wider audience. It is a big “unless.”
Despite these risks, Bernstein rates Robinhood and Coinbase as “outperform.” They set price targets of $160 for Robinhood and $510 for Coinbase. These targets suggest a potential upside of 12% and 60%, respectively. Clearly, the analysts see significant growth potential.
Robinhood’s Record Quarter and Crypto Focus
Prediction markets played a key part in Robinhood’s record third quarter. Bernstein analysts noted this in a separate report. They see prediction markets as another $100 million annual revenue business for Robinhood. This is similar to projections for its Bitstamp crypto exchange.
Robinhood posted $1.27 billion in Q3 revenue. That is a 100% jump year-over-year. It also beat consensus estimates by 5%. Earnings per share came in at $0.63, beating expectations by 18%. The company’s assets under custody reached $333 billion, up 19% quarter-over-quarter. Funded user accounts climbed to 26.8 million. Even its premium “gold” subscribers grew to 3.9 million, generating roughly $188 million in annual subscription revenue.
Robinhood’s crypto products were a big contributor. Trading volumes hit $80 billion in Q3. This was its highest quarter since 2021. Increased activity and new token listings on its main platform drove this. The first full quarter of its Bitstamp integration also helped. That integration is tracking at a $100 million annual revenue run rate. Robinhood is “leaning hard into crypto markets,” Bernstein analysts observed. They are building a “self-reinforcing loop” between Bitstamp, its primary platform, and its European crypto offering. This includes work on tokenized equities.
The shift in prediction markets is more than just a trend. It is a sign of how information itself is becoming a tradable asset. As these platforms mature, and as big players like Robinhood and Coinbase step in, we might just see a new kind of market emerge. One where the wisdom of the crowd, for better or worse, gets a price tag.
