Coinbase (COIN) and Robinhood (HOOD) best positioned in prediction market space, says Cantor

Trading venues Robinhood (HOOD) and Coinbase (COIN) could emerge as the main public-market beneficiaries of the rapid rise in prediction markets, according to a new report from Cantor Fitzgerald.

The report argues that while leading platforms like Kalshi and Polymarket remain private, listed companies are already tapping into the trend by integrating event-based trading into their apps.

These markets let users buy contracts tied to real-world outcomes, from elections to economic data, with prices reflecting the crowd’s view of probability.

“Prediction markets have exploded onto the scene,” Cantor Fitzgerald analyst Ramsey El-Assal wrote, noting that contract volumes are expected to continue their “impressive recent growth trend.”

For firms like Robinhood and Coinbase, the appeal is straightforward. Prediction markets generate revenue through trading activity, not by taking the other side of bets. That model mirrors equities and crypto trading, where both companies already operate at scale.

Robinhood, in particular, has seen strong early traction. The company launched its prediction markets hub following the 2024 U.S. election cycle, and the product quickly became one of its fastest-growing business lines by revenue. Since launch, users have traded billions of contracts tied to sports, politics and macro events.

Coinbase has taken a similar approach but is earlier in its rollout. Its prediction market offering, powered by Kalshi’s infrastructure, is now available across its user base. While still in its early stages, the product spans categories such as crypto, economics and global events.

Cantor frames the opportunity as a function of scale. Platforms with large retail audiences and existing trading infrastructure have a built-in advantage, allowing them to drive liquidity and participation quickly.

The report also pushes back on the idea that prediction markets are simply gambling. “A common misunderstanding about prediction markets is that they are gambling platforms in disguise,” it said. Instead, users “trade against other participants by buying contracts they believe are ‘underpriced’ and selling ‘overpriced’ contracts,” similar to equities markets.

That structure means platforms earn fees from activity, not losses. Prices update in real time as new information enters the market, creating what the report describes as “continuously updated forecasts” driven by financial incentives.

Beyond retail use, Cantor sees longer-term applications in hedging and forecasting. “Prediction markets will emerge as a versatile tool for institutional investors,” the report said, pointing to potential use in risk management and macro hedging.

Still, regulation remains the key uncertainty. The report describes the current environment as “messy,” with federal and state authorities split on whether prediction markets fall under derivatives law or gambling rules.

Cantor’s bottom line is that prediction markets are unlikely to fade. As the regulatory picture becomes clearer, firms with large user bases and strong distribution, such as Robinhood and Coinbase, could be in the best position to capitalize.