According to a report from Cantor Fitzgerald, trading platforms like Robinhood (HOOD) and Coinbase (COIN) are poised to be the primary beneficiaries of the burgeoning prediction market sector. While top players such as Kalshi and Polymarket remain privately held, publicly listed firms are already capitalizing on this trend by incorporating event-based trading into their applications.
These markets allow users to trade contracts linked to real-world outcomes like elections or economic data, with prices reflecting collective probability assessments. “Prediction markets have rapidly gained traction,” noted Cantor Fitzgerald analyst Ramsey El-Assal, adding that contract volumes are anticipated to sustain their strong growth trajectory.
For companies such as Robinhood and Coinbase, the business model is attractive because prediction markets generate revenue through trading activities rather than by betting against users. This approach aligns with their existing equities and cryptocurrency trading operations.
Robinhood has demonstrated significant early success in this arena. Following the 2024 U.S. election cycle, it launched a dedicated hub for prediction markets, which quickly became one of its fastest-growing revenue streams. Since its inception, users have traded billions of contracts covering areas like sports, politics, and macroeconomic events.
Coinbase has also ventured into this space but is at an earlier stage in its rollout. Its offering, powered by Kalshi’s technology, is available to all users and covers categories including crypto, economics, and global events.
Cantor views the opportunity as being driven by scale. Platforms with extensive retail audiences and established trading infrastructures have inherent advantages, enabling them to swiftly enhance liquidity and engagement.
The report also addresses a common misconception that prediction markets are akin to gambling. Instead, it highlights that users trade contracts they perceive as “underpriced” or sell those deemed “overpriced,” similar to equities markets. This system allows platforms to earn fees from trading activities rather than incurring losses, with prices adjusting in real-time based on new market information.
Cantor envisions broader applications for prediction markets beyond retail use, including hedging and forecasting. The report suggests that institutional investors may increasingly adopt these tools for risk management and macroeconomic hedging strategies.
However, regulatory uncertainty remains a significant challenge. Cantor describes the current landscape as “messy,” with authorities divided on whether prediction markets should be regulated under derivatives law or gambling statutes.
Cantor concludes that despite regulatory complexities, prediction markets are unlikely to diminish in importance. As clarity around regulations emerges, companies like Robinhood and Coinbase, with their substantial user bases and robust distribution networks, stand well-positioned to benefit.