Coinbase to Launch Prediction Markets in Partnership with Kalshi
Coinbase is preparing to dramatically expand its financial service offerings beyond cryptocurrency trading by launching a prediction market product in collaboration with Kalshi, a federally regulated event contract exchange. The official reveal of this partnership is anticipated at Coinbase's upcoming "System Update" event scheduled for December 17, 2025. This move is a strategic step towards Coinbase's stated ambition of becoming an "everything exchange" offering a comprehensive platform for various asset classes and diversifying its revenue streams beyond the volatile crypto trading market.
The Partnership and Product Strategy
Coinbase views the integration of prediction markets as a way to diversify its revenue streams and offer users a new avenue to express views on real-world events. The partnership is structured to leverage Kalshi's regulatory infrastructure and experience. In the initial rollout, Kalshi is expected to serve as the exclusive prediction market operator on the Coinbase platform. This controlled launch will allow Coinbase to test user demand, monitor operational performance, and manage regulatory risks before any broader expansion. By integrating Kalshi's regulated event contracts, Coinbase will allow customers to trade on the outcome of a wide range of measurable events, including macroeconomic indicators, policy decisions, and other non-crypto-related outcomes, complementing the existing spot and derivatives trading available on the exchange. Crucially, Kalshi brings its existing infrastructure, which is regulated as a Designated Contract Market (DCM) by the Commodity Futures Trading Commission (CFTC). This federal oversight is vital, as it aligns with Coinbase's focus on regulated product offerings in the U.S.
Regulatory Challenges Ahead
While the partnership with a CFTC-regulated entity provides a strong compliance foundation, the prediction market space in the U.S. remains legally contentious, presenting potential hurdles for the Coinbase-Kalshi venture. Kalshi and other prediction market operators, including Robinhood, have faced increasing enforcement attempts from state gambling regulators. Several states, including Connecticut, Nevada, and New Jersey, have issued cease and desist orders, arguing that certain event contracts (particularly those related to sports) violate state gambling laws, despite the platforms' federal regulation by the CFTC. The core regulatory conflict revolves around whether prediction market contracts are financial instruments for hedging risk (falling under CFTC oversight) or simply unregulated wagering (falling under state gambling statutes). Recent federal court rulings have been mixed, leaving the legal landscape unsettled. Recognizing these overlapping jurisdictions and regulatory risks, Kalshi, Coinbase, and other major players have jointly formed the Coalition for Prediction Markets (CPM) to advocate for a unified federal framework and to defend against state-level overreach. The successful launch and sustained operation of the prediction market product will depend heavily on Coinbase and Kalshi's ability to navigate these complex regulatory challenges, particularly at the state level where enforcement actions have been most frequent.