Gemini’s push into prediction markets is a watershed for U.S. crypto trading — but it comes with big strings attached

A major step forward — and a cautious one

Gemini’s affiliate has announced it won U.S. approval to operate prediction markets, a big moment for crypto-focused trading platforms. The move promises a new product that blends betting-style contracts with the speed and access of modern crypto exchanges. For investors and traders, the headline is simple: a regulated doorway to wagers on events — from economic data to protocol upgrades — that could draw short-term volume and add a fresh revenue stream.

But the approval is not a free pass. The license comes with strict compliance, reporting and design limits that will shape what the product looks like day one. That makes this a classic ‘‘big opportunity wrapped in red tape’’ story: useful for market depth and price discovery, yet guarded by rules that could keep growth measured at first.

What the U.S. authorization actually lets Gemini do — and what it does not

The approval gives Gemini’s affiliate permission to run a regulated venue for event-based contracts — essentially binary or outcome-linked markets that settle after a defined event. That fills a regulatory gap many crypto platforms have navigated in the gray: it makes those contracts a recognized, monitored market rather than an unregulated betting app.

Expect the authorization to include several common limits. Contracts will likely have to settle in cash or in a pre-approved stablecoin, clearing will be centralized through a regulated arrangement, and the venue must operate surveillance and reporting systems to spot manipulation. The regulator typically requires clear rules on who can trade, maximum position sizes, and how disputed outcomes get resolved.

There are also content limits. Markets tied to criminal acts, certain political contests or other sensitive topics may be barred or heavily restricted. And while the approval allows the platform to list many kinds of questions, each contract often needs sign-off or fast-track certification to meet legal standards.

How Gemini’s prediction markets are likely to work in practice

Operationally, the product will feel familiar to anyone who’s used a crypto exchange. Users will buy and sell contracts representing a yes/no outcome or a numeric measure (for example: whether a protocol upgrade activates by a deadline). Liquidity will come from an order book or automated market maker on the platform, and the venue will take fees on trades — maker/taker or a spread — which is where the exchange will earn money.

Settlement is a key detail. Regulators generally prefer fiat settlement for regulated contracts, so expect either dollar payouts or settlement in a regulated stablecoin rather than raw bitcoin or ether. On-chain elements may still be part of the experience: user UIs, wallets, and public records of trades can be on blockchain rails, while the legal settlement happens off-chain through the platform’s clearing system.

KYC/AML will be required. That means many casual crypto traders who value anonymity will be screened out, and institutions or verified retail users will dominate early activity. The practical result: cleaner but potentially shallower order books at first.

What this could do to markets, tokens and exchange economics

Prediction markets can improve price discovery by letting traders put capital behind specific outcomes. For crypto events — think hard forks, major upgrades, or even regulatory decisions — having a regulated place to trade those probabilities could reduce informational gaps and shorten reaction times across markets.

For exchanges and platform investors, the immediate effect is product diversification. Fees from prediction contracts are a new revenue line that is less tied to spot volatility. That said, initial volumes are likely to be modest: these markets typically take time to build liquidity and user trust under strict compliance regimes.

There’s also spillover: tokens tied to protocols that are the subject of frequent prediction contracts might see faster, sharper moves around events. Exchanges competing with Gemini will feel pressure to match the product, which could spur a wave of regulated offerings and a temporary bump in trading volumes industry-wide.

Regulatory and compliance risks that could dent the upside

This isn’t a low-risk launch. Operating under U.S. oversight brings constant scrutiny: the regulator can demand reporting, limit contract types, and impose fines or suspensions if market manipulation or compliance failures are found. Political sensitivity is another factor — markets tied to elections or law enforcement outcomes attract outsized attention and pushback.

There’s also legal tension around settlement currency and custody. If regulators insist on fiat-only settlement, that reduces the appeal for pure crypto natives. Conversely, settling in crypto could invite tighter rules or conflict with existing securities or gambling laws. Executing KYC/AML cleanly is non-negotiable; any lapses would threaten the license and the wider business.

Practical signs investors should watch next

Short term, watch volumes, open interest and the mix of contract types. Those numbers tell you whether users and liquidity providers actually show up. Also watch the settlement method: fiat or stablecoin settlement changes the user base and the regulatory signal.

On the competitive front, see how other major venues respond — product launches or similar approvals will shift where flows go. Finally, monitor enforcement actions or guidance from regulators; punitive rulings or clarifying rules will quickly change the profit calculus for prediction markets in crypto.

Bottom line for investors: this approval is a meaningful step toward mainstreaming event-based markets in crypto, with clear upside for platform economics and price discovery — but expect constrained growth and a high bar on compliance before this becomes a big, steady profit center.

Photo: RDNE Stock project / Pexels

Sources

• globenewswire.com
• cointelegraph.com