Coinbase buys The Clearing Company, doubling down on prediction markets

Coinbase said on Monday it will buy prediction markets startup The Clearing Company, its tenth acquisition this year, as the crypto exchange looks to expand beyond its core digital assets business.

Prediction markets let users buy and sell contracts tied to the outcomes of real-world events, ranging from elections and economic data to sports and policy decisions, effectively turning investors’ forecasts into tradable markets.

Supporters say the prices can reflect collective expectations more accurately than polls or forecasts, while critics argue the products blur the line between financial markets and betting, drawing growing scrutiny from regulators.

Prediction markets surged into the mainstream during the 2024 U.S. presidential race and have since drawn rapid interest and investments from all corners of the financial ecosystem.

Meanwhile, trading platforms are broadening their product suites to encompass multiple asset classes under one roof as competition intensifies. This shift, analysts say, could help Coinbase reduce its reliance on crypto trading as new players crowd the market.

“Prediction markets offer the company a high-engagement, high-frequency product that broadens the reasons for opening its app beyond crypto,” analysts at brokerage Benchmark wrote in a note last week.

Earlier this month, Coinbase launched its prediction markets platform and said it will start letting users trade stocks, positioning it as a direct competitor to brokerages such as Robinhood and Interactive Brokers.

“We see many of Coinbase’s new initiatives encouraging and incentivizing customer engagement, which has been episodically more limited,” analysts at brokerage J.P. Morgan wrote in a note after the products were unveiled.

The deal for The Clearing Company is expected to close in January. Coinbase did not disclose the terms of the transaction.

Among its notable deals this year, Coinbase agreed to buy derivatives exchange Deribit for $2.9 billion in May, and struck a roughly $375 million deal for investment platform Echo in October.

Its shares were last up 2.6% in afternoon trading.

—Manya Saini, Reuters

View the full article