Morgan Stanley downgrades Coinbase on earnings confidence, shares fall 4%
Morgan Stanley cut its rating on Coinbase on November 3, sending the stock down 4%. The bank cited deteriorating confidence in the crypto exchange's earnings trajectory. The move came as the broader crypto trading slump weighs on exchanges. Robinhood, also pressured by a 55% drop in crypto revenue last quarter, saw options revenue rise 31% and event contracts generate $173 million — more than six times a year earlier.
Coinbase now faces the exact structural vulnerability Morgan Stanley flagged: its core trading revenue is shrinking while its fastest-growing segment, prediction markets, rests on an unlicensed foundation. The exchange lacks a direct CFTC designated contract market license, leaving it exposed to the state-by-state legal assault that has already pierced the federal shield of licensed platforms.
Bernstein's forecast treats Coinbase's $200 million annualized event-contract run rate as durable, yet every state court loss becomes template law the next attorney general copies. Robinhood, also hit by the crypto slump, at least routes through Kalshi and Rothera partners who hold actual CFTC designations; Coinbase has no such backstop. Competitors with direct licenses can now pitch stability to users burned by regulatory surprises. Morgan Stanley's downgrade forces investors to price that gap directly.