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 quarterly releases as retrospective,” with their attention shifting to “forward-looking demand trends and product roadmaps,” including newer offerings such as prediction markets.
Both companies are expected to report weaker results for the first quarter of 2026 after a decline in crypto prices and trading activity. Bitcoin and ether (ETH) fell approximately 23% and 29% during the quarter, weighing on exchange volumes. Trading activity also slowed as the quarter progressed, with Coinbase volumes falling from around $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 company also expects foreign exchange revenues to be lower than consensus. El-Assal nonetheless maintained an “overweight” rating on the stock and raised his price target to $250, citing improving sentiment and long-term growth drivers.
Robinhood faces similar pressure in the near term. The analyst expects a sequential decline in trading volumes due to slowing market conditions, as well as a decline in net interest income due to lower rates. But the company’s business model offers a certain margin of safety. Higher volatility can increase trading margins, and Cantor expects higher returns on stocks and options to partly offset the slowdown in activity.
At the same time, the quality of crypto revenue could come under pressure. El-Assal pointed out that the platform’s “tiered pricing structure…allows for lower returns for large active traders…and higher returns for marginal traders”, with the latter group retreating during times of volatility.
Despite these headwinds, both stocks have rallied in recent weeks. Shares of Coinbase are up about 18% since the start of the quarter, while Robinhood has climbed about 40% in April from late March lows, helped by improving risk sentiment and easing geopolitical tensions.
The focus is now on what comes next. For Coinbase, investors monitor regulatory developments and new trades. The company’s prediction markets offering, launched this year, “continues to generate significant interest,” El-Assal said.
Robinhood also leverages prediction markets as well as other initiatives such as tokenization and private market access. The analyst said these efforts, along with regulatory changes such as updating day trading rules, could help drive future growth.
Cantor maintained an “overweight” rating on Robinhood and raised its price target to $110.
According to El-Assal, the broader view is that while current business trends remain tied to cryptocurrency price cycles, the next phase of growth will depend more on product expansion and new use cases.
Later Tuesday, the New York Attorney General’s Office filed a lawsuit against Coinbase and fellow crypto exchange Gemini over their prediction market offerings, alleging the products were actually gaming products and therefore in violation of state regulations.
Whether prediction markets – particularly those related to sports – are gaming products is not currently a matter of debate in 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 sports-related contracts are not exchanges and should be licensed and overseen by state regulators. This question may end up before the United States Supreme Court.
