Prediction markets are emerging as a growth strategy for Coinbase and Robinhood amidst declining crypto trading volumes. Analysts predict softer first-quarter results for both companies due to falling crypto prices and trading activity.
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Prediction markets are gaining traction as a new growth area for Coinbase (COIN) and Robinhood (HOOD), as investors look beyond a weak first quarter for crypto trading and focus on future products, according to Cantor Fitzgerald analyst Ramsey El-Assal.
El-Assal said “investors are increasingly treating the quarterly print as backward-looking,” with attention shifting to “forward-looking demand trends and the product roadmap,” including newer offerings such as prediction markets.
Both companies are expected to report softer results for the first quarter of 2026 after a pullback in crypto prices and trading activity. Bitcoin BTC$74,989.75 and ether (ETH) fell about 23% and 29% in the quarter, weighing on volumes across exchanges. Trading activity also slowed as the quarter progressed, with Coinbase volumes declining from roughly $66 billion in January to $54 billion in March, based on third-party data.
Cantor estimates Coinbase’s consumer and institutional trading volumes at $35 billion and $167 billion, both below Wall Street expectations. The firm also projects exchange revenue below consensus. Still, El-Assal maintained an "overweight" rating on the stock and raised his price target to $250, citing improving sentiment and longer-term growth drivers.
Robinhood faces similar near-term pressure. The analyst expects a sequential decline in trading volumes due to softer market conditions, along with a hit to net interest revenue from lower rates. But the company’s business model offers some cushion. Higher volatility can lift trading margins, and Cantor expects stronger yields in equities and options to partly offset weaker activity.
At the same time, crypto revenue quality may come under pressure. El-Assal noted the platform’s “tiered pricing structure … earns lower yields on large active traders … and higher yields on marginal traders,” with the latter group pulling back during volatility.
Despite these headwinds, both stocks have rallied in recent weeks. Coinbase shares are up about 18% quarter-to-date, while Robinhood has climbed roughly 40% in April from late-March lows, helped by improving risk sentiment and easing geopolitical tensions.
The focus now is on what comes next. For Coinbase, investors are watching regulatory developments and new business lines. The company’s prediction markets offering, launched this year, “continues to attract meaningful interest,” El-Assal said.
Robinhood is also leaning into prediction markets alongside other initiatives such as tokenization and private market access. The analyst said these efforts, along with regulatory changes like updates to pattern day trading rules, could help drive future growth.
Cantor maintained an "overweight" rating on Robinhood and raised its price target to $110.
The broader view, according to El-Assal, is that while current trading trends remain tied to crypto price cycles, the next phase of growth will depend more on product expansion and new use cases.
Prediction markets are platforms where users can bet on the outcome of future events, and they are seen as a new growth opportunity for Coinbase and Robinhood as investors seek innovative products.
Cantor Fitzgerald estimates Coinbase's consumer and institutional trading volumes at $35 billion and $167 billion, both below Wall Street expectations.
Bitcoin and Ether prices fell approximately 23% and 29% in the quarter, leading to a decline in trading volumes across exchanges, including Coinbase and Robinhood.
Analysts expect Robinhood to experience a sequential decline in trading volumes due to softer market conditions, though its business model may provide some resilience.
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Later on Tuesday, the New York Attorney General's office filed a lawsuit against Coinbase and fellow crypto exchange Gemini over their prediction market offerings, alleging that the products were actually gambling products and therefore in violation of state regulations.
Whether prediction markets — specifically, sports-related prediction markets — are gambling products are not is currently a topic of debate in both state and federal courts. The Commodity Futures Trading Commission has argued that prediction markets are swaps, and therefore properly regulated by that agency at the federal level. States have argued that at least the sports-related contracts are not swaps, and should be licensed and overseen by state regulators. This question is likely to end up before the U.S. Supreme Court.