Update (March 27, 8:32 pm UTC): The article was updated to add a statement from Coinbase CEO Brian Armstrong.
Coinbase drew backlash after sending in-app notifications promoting prediction-market bets during the March Madness college basketball tournament. The exchange rolled out prediction-market trading for U.S. customers in January through a partnership with Kalshi, offering event-based wagers similar to platforms like Kalshi and Polymarket. Several users said the notification push felt like an attempt to steer crypto customers toward sports gambling and generate fee revenue.
One user on X reported receiving multiple college-basketball alerts within an hour and described the outreach as inappropriate given recent industry trust concerns. PartyDAO co-founder John Palmer questioned whether Coinbase encouraging bets erodes confidence in its money-management stance, the sources of yield on USDC, and the platform’s internal risk controls.
Prediction markets are already facing legal scrutiny: state regulators have filed suits against platforms while the Commodity Futures Trading Commission (CFTC) is pressing for exclusive federal oversight of the space. In December, Coinbase sued regulators in Connecticut, Illinois and Michigan, arguing that the CFTC—not state gambling authorities—should regulate its prediction-market product.
Responding to the March Madness complaints, CEO Brian Armstrong said the notifications were sent by a bug and apologized, noting the company needs to strike a better balance between surfacing products users want and not pushing things they don’t.
Separately, lawmakers are weighing limits on who can trade prediction markets after allegations that insiders and people close to government used such platforms for profit. A prominent allegation involved a Polymarket contract tied to the possible removal of Venezuelan President Nicolás Maduro. Proposed bills would bar the U.S. President and members of Congress from participating in these markets.
Both Kalshi and Polymarket have tightened policies to reduce insider trading and ethically sensitive markets. Kalshi said it will prohibit political candidates from trading on markets linked to their campaigns, while Polymarket introduced rules aimed at curbing manipulation and insider-driven activity.
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