Prediction Markets Could Be Next Big Crypto Use Case, Says Coinbase

Prediction markets like Kalshi and Polymarket are broadening the use case for cryptocurrencies, according to Coinbase Global (NASDAQ: COIN).

In real time, that thesis is being realized.  The Polygon blockchain powers Polymarket, the world's biggest exchange for event contracts.  In the past, several gaming organizations have also utilized that blockchain for non-wagering purposes.  Ethereum, Solana, and POL, the native currency of the Polygon blockchain, can all be used to fund accounts on Polymarket. The stablecoin USDC is used to buy contracts on the platform.

"Since gaining mainstream attention during last year’s presidential election, prediction markets like Polymarket and Kalshi have grown into one of the most visible crypto use-cases, with traders speculating on the outcomes of everything from sporting events to the weather,” notes Coinbase.

Six digital currencies are available for clients to fund accounts with Kalshi: Bitcoin, Solana, XRP, Worldcoin (WLD), Ripple USD (RLUSD), and USDC.

The Relationship Between Prediction Markets and Crypto Has Synergies

Cryptocurrency is a relatively new asset class.  The biggest and oldest of the bunch, Bitcoin, is only 17 years old. Because young people prioritize use cases, market watchers want to see more conventional financial operations carried out in cryptocurrency as a means of validation.

Prediction markets check that box for a number of reasons, including efficiency. Customers who choose cryptocurrency deposits can fund accounts with up to $500K in a single transaction, which is more than what is possible on conventional deposit routes, as Kalshi previously noted.  On the other hand, customers who used standard bank transfers to fund their accounts could have had to wait a day or two to trade.

Blockchain technology is expanding quickly thanks to the expansion of layer-2 networks and the enhanced security provided by smart contracts. This is another reason why prediction markets are driving up the use of digital currency.

“Several major prediction market apps, like Polymarket and Gnosis Protocol, also rely on crypto infrastructure, using smart contracts and stablecoins to offer users a decentralized way to wager on real-world events,” adds Coinbase.

Investors Paying Attention

Another goal of prediction markets' growing interaction with cryptocurrencies is to lure venture capitalists to the sector.  Kalshi was valued at $2 billion after a $185 million Series C investment round in June, in which a number of institutional investors with experience in cryptocurrency took part.  A new prediction markets operator called Clearing Company acquired $15 million from Coinbase Ventures and Huan Ventures last month.

At a $1 billion value, Polymarket is apparently close to raising $200 million. Renowned cryptocurrency investor Peter Thiel is reportedly leading that investment round.  Last month, his cryptocurrency exchange Bullish (NYSE: BLSH) became public.

Prediction markets have become a "killer onchain use case," according to Hoolie Tejwani, president of Coinbase Ventures, because of blockchain's expansion, smart contract security, and acceptance of stablecoins.