Coinbase's prediction markets business was drawn into a public settlement dispute last month, after a mistaken result on a college football game left the exchange pointing at its partner. CNN correspondent Marshall Cohen reported on September 7 that Coinbase customers were caught up in a settlement error tied to the Western Michigan-Michigan game, as ReadWrite reported. Coinbase's statement blamed the exchange that lists the contracts: "An erroneous settlement by Kalshi led to certain positions being underpaid."
The error grew out of one of the stranger finishes of the college football season. No. 16 Michigan trailed Western Michigan 12-7 when officials restored one second to the clock after a review, and quarterback Bryce Underwood then hit JJ Buchanan for a 47-yard Hail Mary touchdown that produced a 13-12 Michigan victory, according to ReadWrite's account. Kalshi had already settled its "Western Michigan vs. Michigan" market on the initial result, treating Western Michigan as the winner, with ReadWrite estimating the market's trading volume at about $18.6 million.
Kalshi admitted it had "wrongly and prematurely settled" the market, Cohen reported, and the venue reversed the incorrect payouts, reimbursed traders mistakenly treated as losers and paid out positions matching Michigan's official win. "We corrected the result to a Michigan win, making sure all Kalshi customers got paid out correctly." Coinbase took a different route. The company said it would credit affected customers with the full amount their winning positions should have paid, while letting customers who received money from the earlier, incorrect settlement keep it. "Payouts already made under the original incorrect settlement will stand and will not be reversed or recovered," the statement said.
The episode came roughly eight months after Coinbase entered the prediction markets business. On January 28, 2026, the exchange rolled out its prediction market platform to US users in partnership with Kalshi, CoinDesk reported, offering event-based yes-or-no contracts on elections, sports, collectibles and economic indicators. The platform, announced in December 2025, uses contracts whose prices reflect market-implied probabilities, according to CoinDesk, and marked Coinbase's latest move toward becoming what the company calls an "everything exchange."
The structure behind the product explains how the blame landed where it did. Coinbase acts as the distributor, while Kalshi provides the contracts, the exchange and the liquidity. When settlement failed, the apology reached customers through Coinbase, with screenshots showing the company telling users it was "manually recalculating the balances for all affected accounts," per Cohen's reporting. The fix, though, was shaped by two different companies: Kalshi clawed back the wrongly paid positions, while Coinbase absorbed the cost of paying twice rather than recovering money from its own users.
For the industry, the incident is a case study in distribution risk. Brokerages and apps that carry third-party event contracts get the customer relationship, and they also get the reputational hit when the underlying venue misfires. Coinbase's decision to eat the double payout kept the damage on its own balance sheet rather than its users' accounts, a choice that other distributors watching the space will measure against their own economics.