IN TODAY'S ISSUE:
- Crypto trading volumes down double-digit percentages in Q2, reflective of both the decline in prices and volatility and increase in new convex markets available to traders.
- “Trading super apps” are the industry’s response, as crypto platforms and traditional brokers broaden product offerings to capture more of the customer wallet.
- Prediction markets, one of the new types of markets being offered in the trading super apps, offer economic benefits by aggregating information, pricing outcomes, and allowing the hedging of hard-to-surface risks. However, they are heavily driven by sports betting, resulting in a battle over federal and state oversight.
The Rush for the Trading Super App and Its Implications for Crypto
One of the clearest business trends across crypto over the past year has been convergence around a smaller set of growth opportunities. Stablecoins and tokenization have attracted significant investment from crypto-native firms as well as traditional financial institutions and technology companies. But, for crypto companies that rely on trading revenue, the strategic response has been different: broaden the menu of trading markets available to users beyond crypto. That expansion now includes prediction markets, equities, tokenized assets, precious metals and commodities, perpetual swaps, and other derivatives. The result is an increasingly competitive race to build a trading super app.
Crypto Volumes Are Down…
Two market shifts are driving the race to build the trading super app: crypto trading demand has weakened, while the supply of alternative speculative markets has expanded. The direct effect of the latter on the former is difficult to isolate, but the overlap in user behavior and product design suggests that competition for speculative capital is increasing.
Crypto trading volumes have fallen alongside prices, and Q2 results from publicly traded crypto companies reinforce the trend, with trading activity generally down roughly 15%-25% quarter-over-quarter. The weakness appears primarily cyclical because lower prices and lower volatility reduce turnover, but there may also be a structural component as crypto activity has increasingly concentrated around a smaller set of use cases.
That narrowing is visible in market composition. Bitcoin dominance rose through the last cycle, which is unusual relative to prior peaks because speculative altcoins, many with limited utility, have historically outperformed late in bull markets and pulled market-cap share away from bitcoin. That rotation was far less pronounced last cycle, suggesting speculative demand within crypto itself was narrower even before accounting for competition from new high-convexity markets outside the asset class.
…While the Supply of Speculation Is Up
The shift in market structure from 2021 to today illustrates how much the supply of speculative markets has expanded. Crypto’s advantage five years ago (during the Covid era) partly reflected scarcity because 24/7 trading, embedded leverage, and extreme volatility were difficult for retail traders to replicate elsewhere. We saw parts of it seep into traditional markets too as that period coincided with the rise of meme-stock speculation and r/WallStreetBets, while organized sports were disrupted and prediction markets had not yet reached meaningful scale.
Today, those characteristics are no longer unique to crypto. Prediction-market activity on Kalshi and Polymarket has accelerated since mid-2025, while TokenInsight reports traditional-asset perpetual volume on crypto venues increased from $52 billion in January 2026 to $268 billion in June, a more than 5x increase in six months. The growth suggests speculative activity is expanding into non-crypto markets even when traders remain on crypto-style infrastructure.
The implication is greater competition for the marginal speculative dollar. A trader seeking a 5x or 10x payoff can now choose among bitcoin, Nvidia, gold, an equity perpetual, a 0DTE option, or a sports event contract rather than concentrating risk-taking in crypto.
Speculative Capital Is Rotating, Not Necessarily Disappearing
The more useful behavioral framework is asset-class agnostic. Short-horizon traders tend to follow volatility, narrative momentum, and expected payoff distributions rather than maintain permanent loyalty to crypto. The same trader can rotate into precious metals, AI equities, leveraged equity derivatives, or prediction markets without materially reducing overall risk appetite.
Lower crypto trading volumes may increasingly reflect both cyclical weakness and a structural fragmentation of speculative attention across a much broader set of high-convexity markets.
The Trading Super App Is the Response to Fragmentation, with TradFi Starting to Adopt as Well
Coinbase, Robinhood, Gemini, Kraken, Bullish, and Crypto.com are broadening beyond crypto because a customer who rotates into another high-volatility market can still generate transaction revenue if the next trade stays within the same ecosystem. Coinbase and Robinhood have pushed into equities and prediction markets, Kraken and Crypto.com into traditional-asset perpetuals and tokenized exposure, and Gemini into stocks and event contracts. The trading super app is therefore more about maximizing share of user wallet rather than a specific asset class, even if many of these started as “crypto companies.”
The same convergence is occurring in traditional brokerage. Interactive Brokers, E*TRADE, TradeStation, and Charles Schwab are expanding product breadth, crypto access, derivatives, and trading hours to retain active customers. The competitive battleground is therefore becoming less about crypto versus traditional finance and more about which platforms can offer the broadest set of tradable markets without forcing users to move capital elsewhere.
Push Into New Markets Hasn’t Been Seamless
Diversification can reduce revenue sensitivity to a single crypto cycle, but it also introduces regulatory complexity as platforms move into products governed by securities, derivatives, and gaming regimes. Prediction markets, one of the largest new product pushes across trading super apps, illustrate that tension.
Prediction Markets Have a Legitimate Financial Use Case
Prediction markets allow users to trade on the outcome of future events, including elections, economic releases, geopolitical developments, weather, financial markets, and sports. In theory, these markets create economic value by aggregating information, producing market-based probabilities, and allowing individuals or businesses to hedge risks that are difficult to isolate in traditional financial markets.
In Practice, Sports Has Become a Major Volume Driver
The commercial use case increasingly has diverged from the economic rationale, however. Sports, rather than hedging or information markets, has become a major volume driver. Pew’s May 2026 analysis found that sports represented 80% of Kalshi volume and 39% of Polymarket volume from July 2024 through early May 2026, while politics represented just 4% of Kalshi volume and 32% of Polymarket volume. Combined monthly volume across the two platforms increased from less than $5 billion in September 2025 to roughly $24 billion in April 2026, making the regulatory distinction between a financial event contract and a sportsbook wager increasingly important.
The CEA Creates the Federal Pathway
That distinction sits at the center of an escalating federal-state dispute that is now generating near-daily litigation. Under the Commodity Exchange Act (CEA), event contracts can qualify as federally regulated swaps and trade on CFTC-regulated designated contract markets (DCMs). New contracts have historically been brought to market largely through self-certification: DCMs certify that a product complies with the CEA and CFTC rules and can generally list it without prior CFTC approval. The CEA separately gives the CFTC authority to prohibit contracts involving gaming, terrorism, assassination, war, unlawful activity, or similar activities when it determines that trading would be contrary to the public interest. Gaming is not automatically banned, so a sports contract can involve “gaming” and still trade unless the CFTC determines that it fails the public-interest test. In June 2026, the CFTC proposed a framework that would subject sports and other gaming-related event contracts to heightened, contract-specific review rather than a categorical prohibition. The combination of self-certification and public-interest standard has created the federal pathway through which sports event contracts have proliferated, setting up a broader showdown over whether these products are primarily federally regulated derivatives or state-regulated gambling.
States Are Pushing Back on Federal Preemption
States are pushing back because federally regulated sports contracts can circumvent state gaming regimes that impose licensing, taxes, age restrictions, self-exclusion programs, and other consumer protections. In April 2026, 38 state attorneys general backed Massachusetts in litigation arguing that Kalshi's sports contracts amount to unlicensed sports betting, filing an amicus brief at the Massachusetts Supreme Judicial Court. The CFTC took the opposite position that same day, filing its own amicus brief in the Massachusetts case asserting exclusive federal jurisdiction over event contracts traded on CFTC-regulated markets, and separately, in a parallel action, had already sued New York seeking to bar the state from interfering with federally regulated prediction markets. New York then won an important preliminary ruling on July 7, when a federal court rejected Kalshi's attempt to block enforcement of state gambling laws, before escalating further on July 31 by suing Kalshi directly and alleging that its event contracts constitute illegal gambling because the company lacks a New York gaming license. The outcome remains uncertain and likely months from resolution. Absent Congressional clarification, conflicting federal and state rulings increase the probability that the states vs feds question moves through the appellate courts and potentially reaches the Supreme Court.
The CFTC Is Defending Jurisdiction While Warning the Market
The CFTC is simultaneously defending prediction markets from state regulation and tightening oversight of the same venues through warnings and enforcement actions.
Warnings have focused on market structure and DCM compliance. In March 2026, the Division of Market Oversight reminded DCMs of their surveillance, product-review, and anti-manipulation obligations, with particular attention to sports contracts. The agency then signed an information-sharing agreement with MLB on March 19 to improve detection of fraud and manipulation in baseball-related markets. By August 12, the CFTC was warning DCMs again, this time over an increasing number of deficient filings for market-maker, liquidity, trading, and incentive programs tied particularly to event contracts.
Enforcement has focused on misuse of information and fraud. In February 2026, the CFTC highlighted two Kalshi cases involving misuse of nonpublic information and fraud, including a political candidate trading on his own candidacy. Enforcement escalated in April, when the CFTC charged an active-duty U.S. service member with allegedly profiting from classified information through prediction-market trading.
The broader message is that the CFTC is arguing that prediction markets belong inside the federal derivatives framework while simultaneously policing the insider-information, manipulation, surveillance, incentive, and market-integrity risks that come with that expansion. Broader federal acceptance does not imply light-touch regulation.
Final Thoughts
Regardless of where the prediction-market regulatory battle ultimately lands, the big change that may be affecting crypto markets is that access to high-convexity trading markets is no longer scarce. The competitive advantage in this new paradigm of trading super apps likely shifts to controlling distribution, engagement, and the customer relationship, all while giving the customer access to desired financial products.
The broader question is therefore not whether the trading super app succeeds, because the incentives for platforms to broaden product breadth are already clear. The more important question is what becomes the scarce asset once every platform can offer nearly everything. The answer increasingly looks like customer attention, trust, and wallet share rather than access to any single market.
