Dec 17 (Reuters) - Coinbase said on Wednesday it will start letting users trade stocks and event contracts tied to real-world outcomes, as the exchange expands beyond its crypto roots to compete more directly with rivals.

Investment platforms have been diversifying into different asset classes to encourage customers to trade under one roof, as firms vie for a larger share of retail trading volume.

Coinbase's expansion could help reduce the company's reliance on crypto trading, which has become increasingly competitive due to several new entrants, and push it deeper on to the turf of brokerages such as Robinhood and Interactive Brokers.

It, however, comes at a time of heightened regulatory uncertainty for event contracts.

While companies in the industry say such contracts are under the sole purview of the Commodity Futures Trading Commission, some state regulators are trying to assert authority, arguing they resemble betting and can spur speculative behavior among retail investors.

"Fragmented policies that vary by state ultimately harm consumers who need consistent, transparent rules," a spokesperson for Coinbase said.

Event contracts let customers wager on the outcome of real-world events, ranging from sports and politics to financial markets.

CROWDED MARKET

Coinbase's rivals Robinhood and Interactive Brokers, as well as a wave of smaller startups, have already entered the event contracts space. But a top Coinbase executive dismissed concerns the company is behind the curve.

"We aim to offer the greatest variety of contracts available on one platform," said Max Branzburg, head of consumer and business products at Coinbase.

"We expect existing Coinbase customers will bring all of their assets under one roof, while we reach a new subset of consumers."

The company has partnered with Kalshi for the expansion, and could tie up with other platforms in the future, it said.

In a note earlier this week, analysts at brokerage Citizens Financial estimated prediction markets were currently generating nearly $2 billion in revenue, which could jump five-fold by 2030 as institutions start participating.

Coinbase also said it will launch tokenized stocks in the coming months, to let users trade round-the-clock.