Brian Armstrong and Tarek Mansour on Coinbase's 'Everything Exchange' — stocks, prediction markets, and crypto under one roof

crush your backlog with a personal AI engineering team. Merry Christmas to everyone. We have Brian Armstrong from Coinbase and T is back on the show. Uh, so many repeat guests. It's so great to see both of you. Congratulations on all the fantastic success. Brian, would you mind kicking us off with a little highlevel overview of the news? Good to see you.

Yeah, sure. Good to see you guys again. Well, we had a great product event yesterday in San Francisco. We announced the Everything Exchange. So, we've got stock trading on there. We've got prediction markets. We've got millions of tokens now trading through decentralized uh exchanges. We've got simple derivatives. Like we we announced a ton of stuff yesterday and one of the big ones was prediction markets which we're happy to partner with Kaly on. We love Keli. They've been awesome to work with.

That's great.

And um prediction markets are huge. They're an important asset class for people who are trading them but it's also a way for people to get information about what's going to happen in the world. So it's kind of an alternative to traditional media. It's entertainment. It's everything. And uh yeah, Ki's awesome. Uh, so talk to me about how the Koshi integration actually works. Is it more like is this a B2B deal? Will a Coinbase customer actually be seeing the Kali logo? Will they will will they need if they have two accounts or the accounts linked? How are you thinking about kind of the integration kind of taking shape over the next year or however you can talk about it?

Yeah. Well, it's a white labelled integration and Tara can talk more about his strategy of being a provider to lots of different companies. So it made it really easy to integrate. I mean it's not an exclusive arrangement, right? So we can integrate with other ones. We could launch our own. But for right now, we're very happy building on top of Koshi. It's allowed us to get to market really quickly.

And from a Coinbase point of view, I'd say just,

you know, Tradfi and crypto is intersecting or you could say another way to say it would be the crypto is just eating all financial services. So Coinbase is the leader in the space. We've got the most trusted brand. We've got the most deep crypto expertise. We've got we're storing more crypto than any other company in the world by far. about $500 billion of assets. And so if they can trade everything where their assets reside, it's our key to winning.

Uh Tar, take me through uh where like how this plays into your growth strategy, your growth uh trajectory for the next year. Is this just a new way, a new top of funnel? Is this actually building up more liquidity, opening up different markets? Are we going to see different uh koshi markets because of this partnership? uh how do you think things are going to evolve over the next year?

Yeah, maybe let me answer actually at a personal level. You know, I don't know if you saw Wana Street yesterday,

which is funny. The first time we actually both interfaced with Coinbase was when we got the $100 of free crypto [laughter]

in our freshman year at MIT.

Amazing.

You know, we had to sign up. We got the $100 and like, you know, uh a decade later, uh we're we're partnering with Coinbase. Just like an amazing kind of personal moment. But from a person from a company perspective, our goal has been sort of there's the first party product, the cash.com, but you know at the same time as building an exchange and each of these products require liquidity and liquidity has a bit of a sort of this aspect of more liquidity begets more liquidity and as you partner with sort of brokerages or you know large platform with as Brian said like huge customer base, huge deposits that brings more flow to the exchange which improves the liquidity and thus the product for everybody else um including you know Coinbase itself. So, we're very excited about this partnership. Um, you know, I believe, you know, there's going to be like a long kind of range of markets available on Coinbase um that people can participate in and um uh uh over time we're going to be adding increasingly more markets. Um so, lots lots of work to do. This is just the start. uh how like you guys spend a ton of time talking to users and I also feel like you guys have both gone viral for different things that you've talked about related to prediction markets over the last over the last couple weeks and everybody online is going to form their opinion of why prediction markets are good or bad or uh this or that but like how uh yeah m maybe I just kind of wanted to understand like how how how consumers feel uh maybe on your side Brian I'm I'm I'm assuming like you you and the team spend a bunch of time talking to people and understanding what what users want out of prediction markets on the Coinbase app and and what they're most excited about.

Yeah. Well, obviously sports is such a big category that is driving a lot of demand right now and I think that that's an important use case that we see from our customers that there's demand for that. Um, you know, I know I think there's a lot of open questions about how that's going to be treated in society and go through the courts and everything. And, you know, we think ultimately there the CFTC will have federal preeemption here. Um and a bunch of states are, you know, a little grumpy about that, but that's fine. Um the there but prediction markets is much broader than just sports, right? It's people betting on um you know economic indicators and trying to figure out like is the Suez Canal going to be open uh next month and uh political outcomes and I think like the number of markets could just be dramatically higher and like 1% of people are using it as an asset class to trade but like 99% of people looking at these are using it as a way to figure out what's going to happen in the world next. So it's actually broader. It's something like an alternative to traditional media. I think like actually Tar told me a really powerful idea which is that policy makers could actually use this to determine what are the best policies to implement right like let's say you're trying to put out some policy to try to build more housing in San Francisco or to reduce unemployment you could actually put this on a prediction market get real signal from the market about what would happen if these were actually implemented and then use that to choose the best policy so

I think prediction markets are a really powerful tool

that that example in particular how like who are the market participants in that situation? Because I could imagine I I think a lot of people's like big big concern is that you end up with uh

is it like like

like if I'm if I'm a big if I'm a big housing developer or something like that I I could potentially get in like you know try to influence policy through like sort of like trading that market and maybe so I don't know I I think part part of why like you got uh anybody in the predict prediction market space keeps going viral is like in any of these situations I feel like there ends up being um like it's easy to imagine like some kind of negative externalities, but I guess that's the case for all new technology.

Yeah.

Yeah. Well, Tar should talk more about it, but I think the game theory is so interesting because there's both there's parties on both sides who stand to gain or lose. And if you really believe that the housing market would be better for your business, whatever, you can you can go invest in that that contract. But if you're wrong, you stand to lose a bunch of money. So, it's actually the best signal that you can get with people having real skin in the game. Cuz think about what's the alternative. It's essentially pollsters like running around and surveying people. And there's kind of like people's revealed preference versus their stated preference. Like sometimes people will state, "Oh, my preference is X." But the revealed preference turns out to be actually something different because there's real skin in the game. So, I think prediction markets have much stronger signal than traditional polling. But I don't know, T, you're the expert here. What's What do you think? We've dealt with this a lot, right? Back last year when we were um fighting the government to legalize election markets and we won that lawsuit. The criticism was could people kind of use money to influence the the odds, move them up or down in and either way. And you know, the the best argument for that is like, well, if you really wanted to sort of influence the perception of who's going to win an election or, you know, whether a certain policy is good or bad, you would influence the polls. It's super easy.

There's no cost. you can sample in a certain way. You can there's all sorts of way where you can bias it.

Um or you can go on TV and say a bunch of things which is how most of us get informed about what's happening in the world today, right? Like you can tweet or say a bunch of things with no skin in game or repercussions. And like Brian said,

the elegant thing about prediction markets is there's a very strong monetary incentive to be truthful and a very strong monetary disincentive to lie.

You know, people don't lie when money's involved. And so that's how over time prediction markets tend to be a more accurate gauge about what's going to happen. But in in this specific example about what we should do when it comes to certain policies.

Yeah. And what you said uh we we can certainly uh you know because the the debate around which markets are uh genuinely sort of valuable and and necessary and all that stuff will continue for a long time. But

is there a meaningful distinction there around like positive some markets versus zero sum markets? It feels like that might be sort of some of the vibe shift that's happening is like if you if you if you create a financial product that allows people to invest in this the you know the American stock market broadly it's gone up historically it's most likely positive sum but you know there can only be one winner of the Super Bowl and so it's sort of a zero sum market. Is that a reasonable like framework to think about uh where the activity is shifting? we're shifting from maybe more positive some markets to zero sum or is that not a factor?

I I I mean Brian let me know what you think but like I don't think so. I mean

the derivatives market so options or futures or all of these markets have historically been zero sum.

Okay. Yeah.

When you buy, right? And and but they're still very useful.

Yeah.

And you know people usually criticize these market. The main criticism is they're speculators. Yeah. People that are sort of like speculating on an outcome and

Y

and that's okay because without speculators you don't get the benefits. You don't get the price and forecasting benefits. And if there are certain people that want to hedge on something like they are adversely impacted by something going on like I don't know Brexit happening or election going a certain way or the other sports markets which happens uh pretty often

they kind of need the liquidity and and so the healthy balance is basically balance between sort of people that like drive usefulness out of the markets and speculators and that's how any of these traditional markets operates.

Yeah. Yeah. I think I think one thing that's undeniable is that it's it's a it's a very entertaining experience just to use the data like scrolling and trying to understand uh and this idea of of you know having having visibility into things that could become the future headlines of the world and I I appreciate that that is sort of a public benefit by that is created through uh people that are choosing to trade these markets. Do you have any insight into uh I mean Brian, you've done a great job at uh running a firm that winds up servicing institutional investors as well and institutions uh in addition to consumers. And uh there's been some viral chatter around uh prediction markets potentially either replacing or augmenting insurance products. And the initial reaction to that was like, wait, instead of just getting like fire insurance, I have to be like trading a contract every single day. But I was actually thinking about like maybe in the future there's a new insurance firm that's using some sort of prediction market under the hood. Have you thought about what the the role of institutions in a world where the liquidity around prediction markets is increasing? uh how do institutions come in and actually maybe build products around prediction markets that have value to a different consumer?

Yeah. Well, just zooming out, I mean, you're correct. Coinbase is serving multiple different customer segments. So, like the Coinbase retail app is what a lot of people know us for. That's probably the most comparable to Robin Hood for instance, but we also have product for businesses. We have product for institutions that's the leading. We have a developer platform. We have a self-custodial wallet. So, we're doing a lot of different things on the uh prediction market for insurance point of view. I mean, that's an interesting idea. Actually, I hadn't looked too much into that. I think institutions are going to start trading prediction markets. I doubt that'll be the the first place they go, but I could see them using that over time.

Yeah, I uh yeah, it's it's it's clearly like we're at the very early stages of all this. Um I I am interested in some of the other uh the other Coinbase launches. Can you take us through um some of the other stuffs particularly uh Coinbase Advisor? I'm interested in uh uh in just anytime a big company has a ton of data and is and is actually surfacing something that's AI powered. Um how do you think about delivering that product? What were the trade-offs that you made and uh and how will you be measuring success? Yeah. So, Coinbase Advisor is there to help you manage your financial life. And it can ingest all the information from your portfolio. It also knows your preferences around risk tolerance. And you can do anything in there from asking it to, hey, help me build a better portfolio to earn more yield or look for opportunities in the market around X, Y, or Z. But it can also prompt you with things that you might have not even known to ask about. Right? So every day it's out there kind of ingesting new information on the internet with some context about what you need and want and it'll present opportunity to you at time about macro events happening in the market which might create trading opportunities. So I think just broadly we think that AI is useful for it's kind of a barbell right it's useful for a segment of people who might not have as much financial literacy as they want or how to maybe maybe not even understand how to use all of these tools. Um, but it's also powerful for advanced traders who just want to eliminate repetitive tasks and toil that are everybody has to deal with in their financial life, right? So AI is disrupting every business out there like financial services is no exa no exception and we want to make sure we're leading on that front. You mentioned uh uh preeemption. Are can you both maybe give me a little tour of um any expectations or what you're looking for uh in Washington in 2026? Um what are you watching? What are you what do you think the US government needs to get right for your industries to succeed in 2026?

Well, I'll happy to start and then t I'll turn it to you. But I Yeah. The main thing Coinbase is focused on is actually getting market structure legislation passed. So you may recall like the Clarity Act went through the House already. It got a strong bipartisan vote. The Senate is now deliberating in the Senate A and Senate Banking Committees their own draft text for market structure legislation. So that would be a landmark piece of legislation if it goes through to complement the Genius Act which went through for stable coins earlier this year. So that's where we're primarily focused and we're it's looking positive that in early 2026 the Senate committees will vote on that and fingers crossed. Now there's a whole other separate work stream around prediction markets but I don't know Tar you want to touch on that?

Yeah Brian I I know you have to jump so feel free uh to take off. Uh uh I think you had a hard out but um you're w you're welcome.

I'm good for a few minutes.

Yeah. Tar Tar, I'd love to hear uh from from a regulatory standpoint how how you're looking at what you're monitoring. Yeah, I mean I think the the state of the world right now is actually relatively clear, at least in our uh shared views. Um we just started and launched a coalition on prediction markets uh a week ago and you know there's a number of participants um in it including Coinbase. Um and really kind of it's all about clarifying and making sure that everybody understands that financial markets are regulated at the federal level and not a state-by-state thing. Um, and yes, you know, as financial markets expand and they kind of touch more people, as you build financial markets that are sort of relatable to a larger audience, there are going to be some interests are going to get ruffled, including some state interests, uh, casinos or others. Um, and so it's not too surprising there's sort of opposition. It usually means that we're on to something big. Um, and you know, there's renovation happening. Um, so really I think as the court sort of like the whole process kind of plays out, it's about sort of proving our side of the case and I think that's going pretty well so far. Um, and then educating policy makers about what this is really about, how it works, how it's regulated at the federal level, um, so that they understand it.

Makes a lot of sense. Well, congratulations on the partnership, guys, and and all the launches, Brian. Uh, you guys have both had a very big years. So,

yeah, we barely scratched the surface. There's like five more things we didn't get to uh that you watched just yesterday, but uh you know uh it's it's the end of the year. So uh hope you all have a fantastic holiday season and hope to see you both on in 2026.

We'll talk to you soon.

Thanks guys. The Coinbase team's firing on all cylinders, so it was cool to get a bunch of those announcements out and people can check out the live stream if they haven't seen it yet. So

fantastic. Thanks so much.

Fantastic.

Catching up, guys. Cheers.

Cheers. Um, let me tell you about Figma. Think bigger, build faster. Figma helps design and development teams build great products together. Um,

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