👋 Hey, welcome to the first edition of Predicted — the newsletter covering the business of prediction markets.

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In this piece, I:

1) Explain why a Coinbase notification is a symptom of a customer-mismatch.
2) Break down the distinct prediction-market user types
3) Show why parlays on Kalshi illustrate a business-model tension, not product innovation
4) Tie these together into what builders and incumbents should actually do.

…But before we get into it, if you haven’t downloaded our Q1 2026 report - you should definitely do that.

Coinbase pushed a notification to some of their user base saying "wager on March Madness—in-app."

This was a technical glitch. A test which was meant to reach only a few users. 

But it didn’t, and AJC, the enterprise research manager at crypto research business Messari, called the platform out publicly for it. 

He was hit with three notifications in an hour, prompting him to wager on March Madness in Coinbase’s prediction markets platform. 

Mistake or not, the macro here is ugly, weird, and it feels like everyone is adding icing to a crumbling cake base. 

The prediction market boom has sparked what can only be described as unprecedented FOMO across crypto exchanges, wallets, defi protocols, crypto protocols themselves, insurance companies, financial institutions and gambling businesses.

All of this, amongst the backdrop of a very public regulatory and policy battle between the state and federal level jurisdiction. 

Now, back to the alerts that AJC received. 

The assumption here is that someone who logs into Coinbase to check their portfolio also wants to wager on college basketball. 

But is that really how this works?

Bolting on prediction markets to a company with ~120m users and just hoping there is traction feels like a strategy primed to fail. 

Even if this was a test, for sports contracts specifically, is the potential demographic overlap worth the loss in trust from customers?

AJC put it bluntly:

Brian Armstrong, CEO of Coinbase, responded, saying that the push notifications were a bug :

What he doesn’t talk about specifically is sports contracts. 

The "everything exchange" philosophy isn’t necessarily the problem, but it is if there is no nuance. 

What product successfully serves sports bettors, crypto traders, and institutional investors?

The answer is: none.

The backlash isn't necessarily about the push notifications, it's about being treated like the wrong kind of customer.

Fundamentally, people building prediction market products or features are struggling to grasp who their customers are. It's not a single persona. Building something that is one size fits all is almost impossible.

And it’s not prediction markets as a form function. 

It’s specifically that hedging oil futures using Polymarket and trading the over/unders on a March Madness basketball game are totally different things, used by different customers. 

Hedging weather or quarterly earnings are different from 15-minute crypto price markets. 

The underlying mechanism is the same, but the customer is completely different. 

There is a misunderstanding about the different types of customers that prediction markets can serve. 

As I see it, here are the different types of customers that prediction markets cater for.

There might be more, but this is what I’m currently seeing: 

Sports bettors
They want entertainment, promotions, and fast settlement. They want parlays, live betting, and yes—notifications when odds move. They want a DraftKings/Fanduel experience but better. Whether that’s through incentives or better odds, or better technology.

They care about UX polish, mobile-first design, and integration with live sports data. They don't care about decentralisation or censorship resistance. Whether it’s Kalshi, Polymarket or Fanduel and Draftkings, it doesn’t make a huge differnece to them.

Sports traders
These folk are different. They're not there for entertainment—they're there for arbitrage and execution. They want tight spreads, deep liquidity, and API access to automate strategies across multiple platforms. They need clean order books, low latency, and minimal fees.

Financial traders
They want liquidity, tight spreads, and low fees on non-sports markets. They want order books, limit orders, and API access. They care about whether the market is deep enough to absorb size without slippage. They're trading political outcomes, economic indicators, or crypto prices. 

Hedgers 
They want prediction markets as risk management tools. A business owner wants to hedge against a regulatory outcome. A conference organiser wants to hedge against event cancellation. A farmer wants to hedge against the weather. These users need long-duration contracts, personalised market creation, and correlation-aware pricing. 

Investors 
They want something else entirely. Protection against inflation, geopolitical risk, or long-term uncertainty. They want structured products, basket exposure, and long-dated expiries. A derivative of their existing investment portfolio, or letting them go against their existing positions in the short term, while not needing to liquidate their current positions. Or perhaps they want to go long/short on a specific event without being impacted by macroeconomic factors.

Building horizontally for all of these audiences is very difficult. 

Marketing and user segmentation are one thing, but fundamentally, this is a product, technical and business model problem depending on who the customer is.

Let’s discuss some of the problems we see in existing platforms, for example.

Kalshi began offering parlays to their customers about 6 months ago. 

Or as Kalshi call them, ‘Combos’. 

In a traditional sportsbook, parlays are where a user picks multiple lines and wraps them into one wager at higher odds. The lottery ticket for sports gamblers.

It’s the most popular bet type for retail bettors, and the highest margin, most profitable product that a sportsbook offers.

But this product was built for a centralised sportsbook. 

I can pick 10 legs and know IF I win, it is paid out. 

But how does that work with event swaps?

One would think that Kalshi take the liquidity from their book and also asks market makers to make markets for these combos. 

Actually, they are shifting this liability to market makers - meaning that they ‘make the markets’ for these parlays. 

That is fundamentally a worse product offering a centralised sportsbook. 

Kalshi, who are a ‘everything prediction market’, still haven’t been able to crack this, and it’s mostly because of the business model. 

As per Legal Sports Report: 

On the surface, this seems pretty good.

Parlays have gone from 0% to 20% of total sports volume on Kalshi in ~6 months.

But, again, as per Legal Sports Report:

Essentially, the feature that Kalshi have built is servicing sports bettors, but not necessarily their own business model properly. Especially when you have to cut in market makers and heavily incentivise them to make the markets for parlays. 

Nevertheless, volume is volume, and it’s something Kalshi desperately needs to keep growing in order to grow into their huge valuation. 

But that’s just one feature set of a traditional sportsbook that a prediction market is trying to replicate, and struggling to find the right business model for.  The customer acquisition cost here is HIGH, and if sportsbooks are making 45-65% of their revenues from parlays, the amount of money required to drive customers away from them is huge. 

This is just one example of the minutiae that is required for a $20bn valuation prediction market business to be competitive with existing products. And still, it’s an unideal way for them to compete, because the core primitives of event swaps are not conducive to building a very profitable parlay product. 

Let alone talking about building for day traders, market makers with deep pockets, and having the infrastructure to support the likes of JPMorgan and Goldman Sachs, who have both indicated prediction markets are of ‘interest’ to them. 

This shit is hard. 

I’ve seen more startup decks and startups in this space in the past 6 months than in the previous 18 combined. 

The question I’ve had from builders, investors, commentators and participants in this space over the last 6 months: 

“Why wouldn’t Kalshi or Polymarket just build this?”

If there's demand for vertical-specific prediction market products, why wouldn't the incumbents just build them?

By the same logic, in 2021, we would have asked:

Why wouldn't Coinbase build NFT marketplaces?
Why wouldn't they build DeFi protocols?
Why wouldn’t they build lending protocols?

Prediction markets span trading, finance, sports betting, and insurance. Building horizontally across this is extraordinarily difficult. 

Either through focus, regulations, or nimbleness, wedges can come from very different places that build vertically focused products in any of these, or other, spaces. 

All the while, there are so many people trying to build prediction markets in this space. 

M&A and consolidation will ramp up massively in 12 months from now. 

But that doesn’t mean that verticalised building can’t be incredibly successful or lucrative. 

At the same time, the already verticalised are going counter-narrative to try and drive their wedge even deeper into consumers.

Trust, brand and distribution are incredibly important right now. 

What Coinbase and others are doing is going to damage all of those, in the hope of some attritional gains in volume, in a space (prediction markets) that they don’t have an edge in, nor where the economics are particularly attractive unless volumes are gargantuan. 

Public, a digital stock brokerage business in the U.S are putting this counter-narrative into play:

The tagline is:

“If you’re looking for a broker that isn’t also your bookie, we invite you to try Public”

And honestly, I think if I were in their shoes, I’d be doing the same thing.

Doing one thing really well. Doubling down on the moat they have built. Tripling down on trust and brand credibility. 

If you’re integrating prediction markets to an existing platform, ask yourself: Is it worth it if X% of our customers get turned off by this?

If you’re building a generalised prediction market and looking to compete on specific product features that a sportsbook, exchange or crypto platform has – ask yourself: is the build is worth it?

If you’re looking to build a prediction market, ask yourself the question: How strong is this wedge and is it defensible?

Disclaimers

This newsletter is for informational purposes only and is not financial, business or legal advice. These are the author's thoughts & opinions and do not represent the opinions of any other person, business, entity or sponsor. Any companies, platforms, markets or projects mentioned are for illustrative purposes unless specified.

The contents of this newsletter should not be used in any public or private domain without the express permission of the author.

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It's crucial to provide our readers with clear information regarding the inherent nature of services and products that might be covered in this newsletter, including those advertised by our sponsors from time to time. When you trade on prediction markets (including event contracts, opinion markets and other speculative instruments) your capital is at risk. Risks associated with prediction markets include price volatility, loss of capital (the value of your position could drop to zero), illiquidity, complexity, evolving regulation and lack of protection. Many prediction market operators do not currently operate in a fully regulated industry, and availability varies by jurisdiction. Therefore, please be aware that when you place funds on prediction markets, you may not be protected under financial compensation schemes and protections typically afforded to investors when dealing with regulated and authorised entities to operate as financial services firm. Nothing in this newsletter constitutes a recommendation to place, hold, or close any position on any market.