Crypto exchanges target prediction markets as token trading declines

Crypto exchanges are expanding into prediction markets as digital asset prices fall and trading volumes decline, according to a Financial Times report. Blockchain.com applied for a US license to offer regulated prediction markets, while Binance US and Coinbase have also sought approval, joining Crypto.com and Gemini in the sector.

Prediction markets allow traders to bet on various outcomes, from elections to economic events. Crypto platforms are either launching their own markets or partnering with established players Polymarket and Kalshi to retain customers and attract new trading activity. The expansion comes amid a long-term slump in digital assets, with Bitcoin and ether down 28% and 42% over the past year, respectively.

Trading volumes on Polymarket and Kalshi surged over 300%, from $17bn to $72bn, while spot crypto trading volumes dropped 18%. Shares in listed crypto exchanges have also suffered, with Coinbase and Bullish nearly halving in value over the past year, while Gemini fell 82%. However, regulatory hurdles remain, as several US states challenge prediction markets under gambling laws.

Michigan regulators recently ordered Coinbase to stop offering event contracts to customers in the state. The move highlights the pressure on digital asset exchanges to diversify revenue beyond cryptocurrency trading as prediction markets become an increasingly important source of speculative trading.