Gemini sets sights on derivatives expansion after winning key U.S. regulatory approval

Gemini Space Station won approval from the U.S. Commodity Futures Trading Commission to operate its own regulated derivatives clearinghouse, a move that gives the crypto exchange a deeper foothold in prediction markets and sets up a potential expansion into perpetual futures trading.

This allows Gemini to clear and settle trades in-house rather than relying on outside infrastructure – giving the company greater control over how its prediction market products function and scale, particularly as it builds toward more complex instruments like perpetual futures (better known as perps).

The news pushed shares up 2.5% in premarket trading.

“Given the opportunity size with prediction markets as well as future crypto derivatives, owning and operating the marketplace end-to-end is powerful,” Cameron Winklevoss, cofounder and president of Gemini, told CNBC in an exclusive interview. “It allows us to meet the fast paced, changing environment … and we can deliver a better experience to our customers and be more responsive.”

Across the industry, exchanges are leaning into products like event contracts, futures — and especially prediction markets — to stabilize revenue that otherwise swings with crypto prices.

“We think prediction markets could be as big as traditional capital markets one day,” Winklevoss said. “We are heavily focused on that for the long term but fully intend to expand our derivatives offering in the crypto space beyond that.”

The approval comes on the heels of a lawsuit earlier this month by New York Attorney General Letitia James against Gemini and Coinbase. She argued that the companies’ prediction market products fall under state gambling rules and should require licenses from the New York State Gaming Commission. The CFTC has pushed back, suing New York and arguing that prediction markets fall under federal derivatives law.

Gemini is also facing investor scrutiny following a steep post-IPO drop amid a broader drawdown in crypto prices. Shares popped 14% in their trading debut, trading as high as about $45, but have fallen 90% since then. Bitcoin has pulled back about 30% in the same period.

“As a crypto-centric business, your fate is to some extent tied to the crypto market,” he said.

Recent investor skepticism has centered on ongoing losses, executive departures and pulling out of international markets and a “company transformation” toward AI (with the recent launch of agentic trading, for example) and prediction markets. A class-action lawsuit in New York alleges Gemini misled investors about its strategy in its IPO.

Winklevoss argued that skeptics who dismiss crypto’s push into prediction markets as a short-term gimmick to boost trading volumes in a bear market are fundamentally underestimating their potential as a powerful, durable growth engine, adding that any innovation is bound to have its share of critics and skeptics as bitcoin did.

“When you when you look at prediction markets, it really summons the wisdom of crowds and allows people to express a point of view on major, important macroeconomic events,” he said. “It is here to stay, and there’s tremendous merit to being able to get a point of view on the future, on these important things in our lives.”

Crypto trading recalibrates

Spot crypto trading is the lifeblood of platforms like Gemini, but it’s highly cyclical, depends on trading volume and is largely driven by market sentiment instead of underlying economic activity. Meanwhile, derivatives, be they event contracts or perps, give companies a path to more continuous engagement.

Gemini launched event contracts in December following CFTC approval. Robinhood pushed into prediction markets through a partnership with Kalshi last year, while Coinbase launched a similar integration this January. Native platforms such as Kalshi and Polymarket remain core players which, like crypto exchanges, are looking for a piece of the perps business.

“The crypto industry has created a tremendous amount of new things that have real application and real value in a short period of time,” Winklevoss said, citing Bitcoin itself as well as stablecoins and decentralized finance protocols built on networks like Ethereum and Solana.

“But for a company like Gemini, our goal is to try and deliver as much value to our customers as possible in the shortest amount of time possible – and crypto is one part of that story,” Winklevoss said.

Before Gemini made predictions its focus, it extended that story to a credit card offering and staking – the process of locking up cryptocurrency to help secure a blockchain network and earn rewards in return. Beyond crypto, the company also plans to bring equities trading to its platform.

“That will take us from a solely crypto-centric company to a company that’s more tied to markets and that should, on some level, smooth out our revenue,” Winklevoss said. “So if one asset class is underperforming another, it should even it out and give you a more indexed approach on these different asset classes.”

Disclosure: CNBC and Kalshi have a commercial relationship that includes a CNBC minority investment.