COIN (Trans): Prediction Mkts Fill the Gap as Spot Softens

Trans compiled by Dolphin Research for $Coinbase(COIN.US) FY26 Q3 earnings call

I. Core takeaways

1) Format and guidance

a. The session used a live Q&A on X, with the results and outlook posted as videos on the IR site. No new quarterly or full-year guidance was provided.

b. Mgmt stated upfront it would not answer when specific tokens might list, nor discuss case-by-case customer support issues.

2) Trading revenue: prediction markets offset spot softness

a. Crypto spot volumes fell 10% QoQ. Growth in prediction markets offset the spot decline, keeping revenue flat QoQ.

b. Prediction markets launched in Feb, with Q3 annualized run-rate exceeding $200 mn.

c. Prediction markets plus derivatives account for about 25% of total trading revenue.

3) Revenue mix: services roughly half

a. Services contributed about 49% of total net revenue. Mgmt attributes this to multi-year diversification investments bearing fruit.

b. For USDC, the company captures roughly 50% of total economics. About 30% of USDC float sits on-platform, with on-platform USDC balances growing for several consecutive quarters.

II. Detailed call notes

2.1 Mgmt key messages

No prepared remarks. Below are mgmt’s core comments organized by business line, with details in 2.2.

1) Trading (Everything Exchange)

a. The past year’s bets on prediction markets and derivatives under the 'Everything Exchange' thesis are gaining traction. Historically, the company focused on crypto spot, while spot declined QoQ this quarter.

b. Mgmt believes underlying business momentum is stronger than the headline 'flat' revenue implies. It also thinks this is not yet well understood by the market.

c. The advanced trading platform will relaunch under the Coinbase Pro brand.

2) Stablecoins and Base

a. The company remains a USDC co-founder while supporting other regulated stablecoins (e.g., PYUSD). It positions itself as asset-neutral.

b. There is competition with Circle in stablecoin payment infrastructure. Both parties, however, share incentives to grow USDC’s market cap.

3) AI Agent

a. Launched Coinbase for Agents, aiming to become the most AI-native financial account across trading, payments, and lending. The product focuses on seamless agent access to user accounts.

b. Agent-driven trading volumes are growing about 20% WoW. Absolute volumes remain small relative to other flow.

4) Tokenized assets and derivatives

a. Tokenized stocks for non-U.S. customers have reached about $3 bn in cumulative trading volume since launch. Monetization today is primarily via Base sequencer fees.

b. Deribit has been integrated into a unified, regulated global exchange. The combined platform spans perps, options, and futures.

5) Security and regulation

a. Post-quantum upgrades for custody are underway. Mgmt views AI-based breaks of elliptic-curve cryptography as unlikely.

b. With the GENIUS Act in place and SEC/CFTC coordination improving, the regulatory backdrop has meaningfully brightened. The CEO expects to shift more focus to customers and product in 2027.

2.2 Q&A

Q: Bitcoin still trades like a risk asset. Is the investment case evolving?

A: It is evolving: still a store of value, increasingly a collateralizable liquidity asset. Mgmt remains bullish on BTC and noted the balance sheet just acquired approximately 18k BTC (live transcript; holdings subject to the financial statements).

Early holders are reluctant to sell BTC but are willing to post it as collateral. Financing on Base has grown recently, with users borrowing against BTC to trade, which also boosts DEX liquidity and creates synergy.

Volumes are recovering this cycle and more institutions are entering. The CFO added that ETF inflows were notable this quarter, with price stabilization and institutionalization lowering volatility and making BTC a key diversifier in portfolios.

Q: To what extent did prediction markets cushion the decline in consumer trading revenue, and what is the outlook?

A: Prediction markets now run at over $200 mn annualized, offsetting a 10% QoQ decline in spot and keeping revenue flat QoQ. Mgmt did not directly address take rates.

Launched in Feb, prediction markets are among the fastest-growing new revenue products. Prediction markets plus derivatives contribute about 25% of total trading revenue, while services account for about 49% of total net revenue.

Mgmt emphasized there is no cannibalization of spot. Users still trade spot, albeit at smaller scale than in prior quarters, while incremental funds are going to prediction markets and derivatives.

Q: Is the relationship with Circle competitive or cooperative, and where do you overlap or differ?

A: It is coopetition: both build stablecoin payment infrastructure, and both benefit from growing USDC’s market cap. The company co-founded USDC while also supporting other regulated stablecoins such as PYUSD, maintaining an asset-neutral stance.

The focus is on distribution, customer relationships, and infrastructure, embedding USDC deeply into transaction flows. USDC serves as margin on the derivatives exchange and is deployed on Base for payments and developer products, with on-platform USDC usage at all-time highs.

The company captures about 50% of total economics and holds about 30% of USDC float on-platform. On-platform USDC balances have risen for five or more consecutive quarters, and the CEO wants stablecoins to keep gaining share in global payments.

Q: Coinbase’s MCP spans x402, prediction markets, and stocks and crypto. How big is the Agent opportunity?

A: Agent volumes are growing about 20% WoW, still small in absolute terms, yet viewed as a top opportunity. Coinbase for Agents lets third-party agents plug into user accounts easily, targeting the most AI-native account for trading, payments, and lending.

Mgmt believes agents will need their own financial stack, both to pay for goods and services and to trade. Such accounts will need permissions and spend controls, and the number of agents could eventually exceed humans.

Traditional FIs are hesitant to let agents touch accounts. If the company can do this safely and credibly, it sees a path to win share.

Q: Coinbase leads U.S. crypto spot share. How do you become No.1 as an 'Everything Exchange' across all assets?

A: The 'Everything Exchange' bets are showing results, and mgmt thinks momentum is stronger than 'flat revenue' suggests. Historically the company leaned into spot, which declined QoQ this quarter, while prediction markets and derivatives are starting to contribute.

There are synergies from combining trading, payments, and lending within one account. Examples include margin accounts amplifying trading and doing FX alongside enterprise collections, and mgmt expects AI to become an important new source of demand.

MCP includes a built-in feedback interface. Agents send hundreds of requests daily to internal Slack, many converted to PRs and shipped about a day later, and the company plans to extend this model to internal APIs.

Q: The CEO is personally submitting a lot of code. Is that related to responding to Agent feedback?

A: Partly yes, with AI writing most of the code, accelerating dev while improving quality. Mgmt said code quality is improving alongside velocity, with fewer security issues and incidents and better reliability. AI is reshaping financial services.

Q: Could AI break ECDSA and similar cryptography, how is custody security preparing, and is the post-quantum roadmap accelerating?

A: Not worried about AI breaking elliptic-curve crypto. Quantum is a 'when, not if', and post-quantum custody upgrades have begun. Over roughly 40 years, efforts to reduce the difficulty of breaking these schemes have made almost no progress, and brute-forcing 256-bit remains necessary, leaving AI with little leverage.

Quantum risk is more tangible, requiring at-scale new computing architectures. Beyond upgrading its own custody, broader chains must also harden against quantum; a few months ago the company joined a Bitcoin post-quantum advisory session at Stanford, and the community has proposals such as BIP 360.

Mgmt expects the Bitcoin community to coalesce around solutions over the coming quarters and does not see the threat as imminent. The CFO added that in 2022 the company acquired a top cryptography team and has continued to invest in fortification.

Q: On Base, are sequencer fees the main monetization of tokenized stocks? With multiple venues offering tokenization, how do you see fragmentation?

A: Today the most direct monetization is sequencer fees. Tokenization itself is straightforward, while liquidity and network effects are the hard part. As networks and liquidity scale, other monetization paths can be explored.

Tokenized stocks for non-U.S. clients have reached about $3 bn in trading since launch. Mgmt expects consolidation over time toward the most liquid venues and cites co-building the USDC ecosystem with Circle as evidence of its capability.

The CEO added that the company’s tokenized stocks represent real securities, with dividends, voting rights being implemented, and redemption into the underlying. This differentiates them from synthetics or derivatives, and as the largest crypto custodian, the company believes it has a right to win.

Q: Many are building vertically integrated financial apps. How does Coinbase differentiate?

A: Differentiation lies in crypto infrastructure and multi-segment platforms, with a goal to build a decentralized financial system. Traditional players are unlikely to bet simultaneously on crypto, AI, and prediction markets, while tech rivals may look similar superficially.

The company aims to serve billions not covered by the old system, rather than funneling people into Wall St. Advantages include Base’s developer ecosystem, co-founding USDC, pioneering the x402 protocol for agent commerce, and DEX integrations.

It serves consumers, institutions, enterprises, and developers, allowing reuse and amortization of builds across client types. Mgmt estimates traditional finance still accounts for 90%–95% of financial services, with all fintechs at only 5%–10% of revenue, leaving room to take share and create new demand such as agent finance.

Q: Post Deribit acquisition, how are perps and options progressing, and what changes come from a better regulatory climate?

A: Deribit is now integrated into a unified, regulated global exchange serving both U.S. and non-U.S. clients. As the largest crypto options venue, Deribit’s integration brings perps, options, and futures together, and the company claims it is among the few able to unify previously fragmented U.S. and offshore liquidity.

The advanced trading platform will relaunch under the Coinbase Pro brand. On regulation, the GENIUS Act is now law, and SEC/CFTC are collaborating to bring more products onshore in the U.S., creating clear tailwinds.

Q: Will Coinbase Pro return? Will you step up retail marketing to reach different segments?

A: No specific marketing plan disclosed, with focus shifting more toward customers and product in 2027. Responding to views that it prioritized Washington over users post-FTX, the company noted it had to represent the industry and even sued the SEC and won.

It will still visit Washington periodically. The emphasis now is on engaging customers and improving products.

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