States keep a free hand against Coinbase's $200 million prediction market line
The Second Circuit refused on November 3 to pause state gambling enforcement against Coinbase's event contracts, five days after management credited the line with offsetting a drop in crypto trading and one day after Morgan Stanley halved its price target to $120.
Vincent Jiangthree-minute read
A two-page order keeps state regulators on the field
A three-judge panel of the Second Circuit, the federal appeals court in New York, refused on November 3, 2026, to pause state gambling enforcement against Coinbase's−2.35% — Coinbase, down 2.35 percent today prediction markets while the company appeals 13.
These are event contracts, wagers that pay out on real-world outcomes, and the two-page order said only that Coinbase and the prediction-market operator Kalshi "have failed to make the required showing that an injunction pending appeal is warranted" 13. Left undecided is whether the Commodity Exchange Act, the federal derivatives statute, keeps such contracts under the Commodity Futures Trading Commission rather than state gambling regulators 13.
Connecticut Attorney General William Tong is Coinbase's opponent in the appeal; New York Attorney General Letitia James has sued Coinbase, Kalshi, Gemini Prediction and Polymarket separately 2. Gemini Prediction, ProphetX and the brokerage WeBull pulled their sports contracts from Connecticut after September cease-and-desist letters; Coinbase stayed and fought, and now fights without cover 2. The circuits are split on its argument: the Third Circuit sided with Kalshi against New Jersey, the Sixth and Ninth with state regulators 1.
The growth line management just leaned on
The refusal landed five days after management leaned on exactly that line. On October 29, with third-quarter results, Coinbase said prediction markets, launched in February, crossed $200 million of annualized run-rate revenue, offsetting a 10% sequential drop in crypto spot volume 34. Revenue held flat with the June quarter at $1.22 billion, still 35% below a year earlier, and the quarter's $719 million profit rested on crypto investment gains while operations earned $31 million, a split our November 3 coverage unpacked 45.
As we reported on November 5, Robinhood's+3.10% — Robinhood, up 3.10 percent today event-contract line took in $173 million in a quarter, more than six times a year earlier, and state regulators are now switching that category off door by door 7. Prediction markets are Coinbase's copy of the same product, and the court just declined to shield it.
Coinbase revenue has fallen year over year for four straight quarters
Prediction markets bought one flat quarter, not a turn
Data
| Total revenue | |
|---|---|
| Q2 '24 | $1.45B |
| Q3 '24 | $1.21B |
| Q4 '24 | $2.27B |
| Q1 '25 | $2.03B |
| Q2 '25 | $1.5B |
| Q3 '25 | $1.87B |
| Q4 '25 | $1.78B |
| Q1 '26 | $1.41B |
| Q2 '26 | $1.22B |
| Q3 '26 | $1.22B |
Morgan Stanley halves its target; 26 of 41 analysts disagree
On November 2, Morgan Stanley−0.82% — Morgan Stanley, down 0.82 percent today analyst Michael Cyprys cut Coinbase to Underweight, a sell rating, from Equal Weight, and halved his price target to $120 from $258 56. The $120 call is one side of the bet our November 3 piece weighed against a $240 bull case 6. He wrote that "confidence in the earnings recovery has deteriorated," and cut his 2027 revenue forecast by 28% to $6.4 billion and his 2027 EBITDA estimate by 47% 6.
October's trading pace, chilled by the $6.3 billion hack at the exchange Binance, points to roughly $607 million of fourth-quarter transaction revenue against the $685 million analysts expect 6. Sell-side analysts are split the way the circuits are: 26 of 41 still rate the stock a buy, and brokerages BTIG and H.C 67. Wainwright argue Coinbase gains trading share from Binance's collapse 67.
The stock is down 57.8% over twelve months and trades at 6.3 times sales on a twelve-month operating margin of 5.7%, against 28.3% a year earlier; no source quantifies how much of that multiple rests on prediction markets surviving state enforcement 4.
Three dated markers will settle the bet
Three readings will price that unknown: the Second Circuit's ruling on the merits of preemption, which the November 3 order expressly left open 13; remand orders that could return the state suits to state court, where Massachusetts, Michigan and Nevada have already banned sports event contracts and Ohio and Tennessee could follow 1; and fourth-quarter results, due February 2027, against $1.78 billion of revenue a year earlier 4. Coinbase's second revenue engine is running; the court just declined to shield it from being shut down state by state.
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