Coinbase Doubles Down on Prediction Markets as Legal Battles and Super Bowl Buzz Swirl
Fresh off a nationwide launch and a buzzy Super Bowl ad, Coinbase is betting prediction markets can diversify revenue — if it can survive a wave of state legal challenges first.
Coinbase is pushing its newly launched prediction markets product to the forefront of its 2026 growth strategy — even as the business faces a growing wave of lawsuits and regulatory pushback over how those markets are classified and regulated.
Executives used the company’s fourth-quarter earnings call to frame prediction markets as a strategic pillar alongside crypto trading, equities, and commodities within what leadership has called an “Everything Exchange” strategy.
CEO Brian Armstrong told investors:
“A few weeks ago, we rolled out prediction markets to 100% of our customers. Soon we’ll add more markets and a dedicated sports hub for prediction markets.”
Kalshi Partnership Remains Central
Coinbase launched prediction markets in December 2025 through a partnership with Kalshi, the first large-scale prediction market exchange in the U.S. Only a week later, Coinbase announced the acquisition of The Clearing Company, a prediction markets startup. At the time, the company said it expected to close the deal in January.
On the earnings call, Armstrong reiterated that the Kalshi partnership is not exclusive:
“We launched it with our partnership with Kalshi, and they’ve been a great partner. It’s not an exclusive arrangement. We also have the ability to launch our own markets. Nothing to announce on that at the moment. But, you know, we’re keeping all options open.”
Coinbase is among several operators that have acquired licensed infrastructure but have yet to launch fully proprietary, in-house exchanges.
Robinhood, which also currently partners with Kalshi, expects to launch Rothera, its joint venture with Susquehanna, in the near future.
DraftKings is another operator expected to launch its own platform after acquiring Railbird Exchange in October. Currently, it offers prediction markets through partnerships with CME Group and Crypto.com.
Legal Challenges Spread Across States
As soon as Coinbase’s prediction markets went live, legal challenges followed.
Just a day after launching, the company filed lawsuits against three states— Illinois, Michigan, and Connecticut — seeking declaratory judgments that prediction markets fall under the exclusive jurisdiction of the federal Commodity Futures Trading Commission (CFTC) rather than state gambling laws.
The exchange argues that sports-event contracts are federally regulated, thereby preempting state gaming regulators. In filings, Coinbase’s legal team asserted that allowing individual states to regulate prediction markets would give the most restrictive jurisdictions de facto control over what should be a nationally available financial derivative.
This week, a U.S. District Court judge in Connecticut heard oral arguments but did not immediately issue a ruling.
Nevada Escalates Enforcement
Earlier this month, the Nevada Gaming Control Board (NGCB) filed a civil enforcement action against Coinbase. The regulator claimed the exchange’s sports-based prediction markets constitute “unlicensed wagering” under Nevada’s gaming laws.
A state court declined to immediately halt Coinbase’s prediction markets via an emergency order, instead scheduling a hearing to determine the next procedural steps.
Enforcement Spreads Beyond Coinbase
Litigation with state gaming regulators is not limited to Coinbase. Kalshi, Robinhood, and Crypto.com are involved in similar cases across several states.
Notably, in Massachusetts, a court granted a preliminary injunction against Kalshi, effectively banning sports-related prediction contracts unless a state gaming license is obtained. Recently, the court ordered Kalshi to geofence the state within 30 days.
NGCB has been particularly active against prediction markets, scoring notable wins along the way. Courts have sided with the regulator in cases against Crypto.com, Robinhood, and Polymarket, all of which have blocked Nevada users as litigation continues. Recently, NGCB announced it plans to file a civil enforcement action against Kalshi on Feb. 17.
Super Bowl Spotlight Drives Early Adoption
Armstrong tied early traction directly to the Super Bowl.
“Super Bowl weekend was a really great moment where a lot of customers got to experience it for the first time.”
That timing wasn’t accidental.
Coinbase aired one of the most talked-about ads of the game — a karaoke-style singalong spot built around a Backstreet Boys track. The ad polarized viewers online but generated heavy social engagement, with the company explicitly prioritizing attention over traditional product messaging.
Coinbase added:
“We just made the most talked about commercial in America. Some people loved it, some people hated it. But millions sang along.”
Armstrong defended the creative approach on X:
“Why did you buy a Super Bowl ad for karaoke? This is why. It broke through and got people’s attention. The [Super Bowl] is such an overwhelming event, the first step is even being noticed. Only then have you bought the right to get them interested in the next step: crypto.”
Industry reaction was mixed. Adweek described the spot as “puzzling” but attention-grabbing. USA Today’s Ad Meter, based on consumer votes, rated it as the worst Super Bowl commercial. Some outlets, such as Yahoo Finance, noted that Coinbase was the only major crypto advertiser this year, a sharp contrast with the multi-brand “Crypto Bowl” era of 2022.
From Awareness to Adoption
On the earnings call, management made clear that the commercial push supports a broader funnel strategy: bring new users into the app, then expand trading into additional segments, such as prediction markets.
Armstrong described the strategy:
“As we’ve added in some of these asset classes like equities and prediction markets and commodities into the Everything Exchange, the first step is it just makes the product more valuable for our existing users, but we’re also seeing it help attract more traditional investors who want to come in and onboard and just have an easiest place to trade every asset class in one spot.”
CFO Alesia Haas characterized early results as promising but still preliminary.
“There’s early encouraging signals, but we don’t want to get ahead of ourselves.”
Q4 Financial Snapshot
Coinbase entered its prediction market expansion with a still-solid balance sheet and growing non-trading revenue, even as transaction activity cooled late in the year.
Key Q4 results:
- Total revenue: $1.8 billion (–5% Q/Q)
- Transaction revenue: $983 million (–6% Q/Q)
- Subscription & services revenue: $727 million (–3% Q/Q)
- Net loss (GAAP): $667 million
- Adjusted net income: $178 million
- Adjusted EBITDA: $566 million
- Cash & cash equivalents: $11.3 billion
- Stablecoin revenue: $364 million
Management framed the quarter as further evidence that Coinbase’s diversification strategy is working, with newer business lines helping smooth crypto market volatility.
In the shareholder letter, the company wrote: “2025 was a strong year for Coinbase, both operationally and financially. We executed consistently against our goals, delivering or outperforming our revenue and expense guidance every quarter.”
Executives also tied that stability directly to expansion into additional asset classes — including prediction markets: “Continuing to grow the Everything Exchange: one platform for all tradable assets, including crypto, derivatives, equities, prediction markets, and more.”
While Coinbase hasn’t broken out prediction market revenue yet, the company is clearly grouping the product alongside derivatives and equities as part of its future growth vehicle beyond spot crypto trading.
What Comes Next
With prediction markets now live in all 50 states through Coinbase’s app, the coming months could provide a critical legal test of whether products like sports event contracts will be treated as federally regulated financial derivatives or as gambling products under state laws.
Any outcome of Coinbase’s litigation in states like Nevada and Connecticut, or any coordinated action in other states, could solidify or derail the company’s growth strategy.
For Coinbase, the strategy is clear: use mass awareness to acquire users, expand into new asset classes like prediction markets, and fight regulatory battles in parallel. As the Super Bowl moment showed, attention may be just as valuable as trading volume.
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