Coinbase wins CFTC clearance as prediction markets top $200 million annualized

Coinbase’s prediction-market business surpassed $200 million in annualized revenue in the third quarter, as the exchange reported growth in traders and said it had received permission from the Commodity Futures Trading Commission to list contracts of its own.

Brian Armstrong said the regulatory approval would improve the company’s economics. Coinbase described prediction markets as one of the fastest-growing products by revenue in its history, with revenue growing at an 82% compound quarterly rate since launch.

Daily prediction-market traders rose by more than 60% from the second quarter. More than half of contracts traded during the quarter were outside sports, including crypto-related events and elections, according to Yahoo Finance. Coinbase said crypto contracts had sustained growth during slower months for sports markets.

As we reported Oct. 29, derivatives and prediction markets together supplied a quarter of Coinbase’s third-quarter transaction revenue. The company presented the products as part of its Everything Exchange strategy, which includes crypto, equities, derivatives, prediction markets and other offerings.

The prediction-market expansion came during a weaker period for the wider crypto market. Coinbase reported $1.2 billion in total third-quarter revenue despite a 10% decline in total market crypto trading volume. Subscription and services revenue reached $570 million, up 3% from the prior quarter and equal to 49% of net revenue.

Coinbase’s adjusted EBITDA was $333 million, 60% higher than in the second quarter, marking its 15th consecutive profitable quarter on that measure. Its crypto trading-volume market share reached 10.7% after four straight quarterly gains, while average USDC balances held in its products rose to a record $22 billion.

The company expects adjusted expenses of $1.07 billion to $1.157 billion in the fourth quarter, partly reflecting increased investment in prediction markets.