TLDR
- Gemini secured a Designated Contract Market license from the CFTC on Wednesday to operate prediction markets
- GEMI stock jumped 13.7% to $12.92 in after-hours trading on the news
- The approval completes a licensing process Gemini initiated in March 2020
- The exchange will offer event contracts and may expand to crypto futures, options and perpetual contracts
- Gemini joins a competitive market where Kalshi and Polymarket have seen explosive growth
Gemini Space Station Inc stock surged in extended trading Wednesday after the Commodity Futures Trading Commission approved the exchange to launch prediction markets.
Gemini Space Station, Inc. Class A Common Stock, GEMI
The CFTC granted a Designated Contract Market license to Gemini Titan, an affiliate of the Winklevoss-owned crypto exchange. This authorization enables Gemini to offer binary event contracts in the United States.
GEMI stock rose 13.7% to $12.92 after hours. The shares closed regular trading down 0.7%.
The crypto exchange filed its DCM license application on March 10, 2020. The approval represents the end of a lengthy regulatory review.
“This marks the culmination of a 5-year licensing process,” CEO Tyler Winklevoss said.
Event Contracts Coming Soon
Gemini will roll out event contracts to US users on its web platform in the near future. These contracts allow users to place bets on yes-or-no questions about future events.
The company plans to broaden its derivatives lineup beyond event contracts. Gemini announced intentions to offer crypto futures, options and perpetual contracts pending further regulatory steps.
President Cameron Winklevoss described prediction markets as potentially “as big or bigger than traditional capital markets.”
The prediction market launch advances Gemini’s strategy to develop a comprehensive crypto “super app.” Cameron Winklevoss detailed this plan during an earnings call last month.
The exchange reported its first quarterly results as a public company in November. Those financials showed losses tied to public listing expenses.
GEMI stock has dropped 64.5% since its September 12 debut. The decline reflects broader challenges in sustaining crypto market rallies.
Entering a Hot Market
Prediction markets have exploded in 2024. Polymarket and Kalshi both recorded their highest monthly trading volumes in November.
Kalshi raised $1 billion at an $11 billion valuation this month. The platform previously defeated the CFTC in court over political betting markets.
Multiple crypto companies are diving into the space. Trust Wallet rolled out prediction markets in early December. Coinbase is building a betting platform with Kalshi backing. Truth Social plans a prediction market powered by Crypto.com.
Robinhood has generated over 50% of Kalshi’s trading volume at various points through its distribution partnership.
Changed Regulatory Landscape
The CFTC’s stance on prediction markets has transformed under Acting Chair Caroline Pham. Previous leadership took a cautious approach, blocking Polymarket operations and restricting Kalshi’s contract offerings.
“Acting Chairman Pham has positioned the CFTC as a pro-business, pro-innovation regulator,” Cameron Winklevoss stated.
The regulatory climate may continue warming under President Trump’s second administration. Trump’s social media venture is partnering with Crypto.com on a prediction market.
The Winklevoss brothers questioned Trump’s original CFTC nominee, Brian Quintenz, over potential conflicts stemming from his venture capital position and Kalshi board membership.
State regulators have filed enforcement actions against certain platforms. Critics argue event contracts constitute unlicensed sports betting.
Gemini will start accepting bets on event contracts from US customers shortly on its web platform.
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