Coinbase and Robinhood Look to Prediction Markets as Key Growth Driver

The growth prospects of Coinbase and Robinhood are shifting towards prediction markets, according to Cantor Fitzgerald analyst Ramsey El-Assal, as investors move past the first quarter's weak crypto trading performance and look towards future product launches. El-Assal noted that investors are now focusing on forward-looking demand trends and the product roadmap, which includes newer offerings like prediction markets. Both companies are expected to report softer first-quarter results due to the decline in crypto prices and trading activity, with Bitcoin and ether falling about 23% and 29% respectively. Despite this, Cantor estimates that improving sentiment and long-term growth drivers will support the stocks. Robinhood also faces near-term pressure but its business model provides some cushion, with higher volatility potentially lifting trading margins. The company's crypto revenue quality may come under pressure due to its tiered pricing structure. However, both stocks have rallied recently, with Coinbase up about 18% quarter-to-date and Robinhood climbing roughly 40% in April. The focus is now on what comes next, with investors watching regulatory developments and new business lines, including prediction markets. Cantor maintained an 'overweight' rating on both stocks and raised its price targets. The analyst believes 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. However, the growth of prediction markets is not without its challenges, as the New York Attorney General's office has filed a lawsuit against Coinbase and Gemini over their prediction market offerings, alleging that they are gambling products and therefore in violation of state regulations. The debate over whether prediction markets are gambling products or not is ongoing in both state and federal courts.