Original Title: State of Prediction Markets
Original Author: Paul Veradittakit, Partner at Pantera Capital
Original Translation: Saoirse, Foresight News
Abstract
Prediction markets are not a new concept—they have finally become decentralized. Humans have long invested money to predict outcomes, but cryptography has transformed this ancient practice into a permissionless, transparent global market. In such markets, prices reflect real-time collective intelligence, rather than the results of opinion polls.
Driven by both infrastructure and regulation, prediction markets are opening up to the broader market. The clear regulatory stance of the U.S. Commodity Futures Trading Commission (CFTC), collaboration with traditional finance (TradFi), and multi-chain scalability have propelled prediction markets from niche experiments to a significant sector with a weekly trading volume of $3.9 billion. Relevant platforms are now being directly integrated into brokerage firms, media, and consumer applications.
"Uncertainty" is becoming a new category of financial asset. As prediction markets gradually evolve into core hedging, data, and forecasting infrastructure, platforms that combine liquidity, credibility, and coverage capabilities—enabling the "pricing" of real-world outcomes on a global scale—will continue to accumulate value.
For thousands of years, humans have been exploring ways to harness collective wisdom to predict the future. The ancient Greeks used special tokens, which were cast into a system of tubes to complete voting processes; at that time, juries would choose solid or perforated stones to express their verdicts. In the ancient taverns known as "kapeleia," private betting was likely a common occurrence as well.
In 17th-century Amsterdam stock exchanges, merchants placed bets on the arrival times of cargo ships. In 19th-century America, political betting dens dominated during election periods until they were banned in the 1940s. Additionally, commodity futures trading on the Chicago Mercantile Exchange also falls into this category. Clearly, humans have long understood that investing money in predicting outcomes can generate highly valuable informational signals.
Today, prediction markets driven by cryptographic technology represent a digital rebirth of this ancient practice—but with key differences: they are permissionless, transparent, open, and globally accessible.
Information Market Revolution: Why Are Cryptocurrency Prediction Markets Different?
Traditional prediction markets require trusted intermediaries to hold funds, verify outcomes, and distribute rewards. However, cryptography and blockchain technology eliminate these middlemen. When you bet on geopolitical, macroeconomic, or cultural questions on the Polymarket platform—whether it's "Will the Federal Reserve cut interest rates in January?" or "Who will win the 2026 Oscar for Best Picture?"—your funds are held by smart contracts, the outcome verification is fully transparent, and rewards are automatically distributed in USDC. The entire process requires no bank account, has no geographical restrictions, and involves no intermediary fees or participant eligibility limitations.
Another major player in the industry, Kalshi, focuses 90% of its business on the sports sector, covering topics such as "Who will win the PGA Farmers Insurance Open" and "Kent State University vs. University of Akron basketball game results." The emerging prediction market platform Novig is even more specialized in the sports domain.
The Convergence Moment: Why the Outbreak Now?
The 7-day trading volume in the current prediction market has reached $3.9 billion, showing explosive growth. The underlying reasons can be attributed to three factors: regulatory maturation, the integration and promotion by traditional finance, and breakthroughs in infrastructure.
From a regulatory perspective, the most notable development is that the CFTC's approval has cleared the way for platforms to operate in the United States. For example, in July 2025, Polymarket acquired QCX LLC, a derivatives trading platform licensed by the CFTC, and QC Clear LLC, its clearinghouse. This enables traders to confidently participate in prediction market contract trading on the Polymarket platform with clear and well-defined rules. Kalshi's $1 billion funding round in December 2025 at a $11 billion valuation also reflects institutional investors' confidence in this space. Overall, regulatory clarity is unlocking institutional capital and retail participation through mature brokerage channels.
In addition to investing $200 million in Polymarket, the Intercontinental Exchange (ICE) will also become the global distributor of Polymarket's event-driven data—highlighting the growing trend of integrating traditional finance with prediction markets.
This partnership has further deepened the integration. Polymarket has entered into a multi-year collaboration with TKO Group Holdings, becoming the exclusive official partner for the Ultimate Fighting Championship (UFC) and Zuffa Boxing. This partnership directly combines prediction market technology with the live fan experience.
In 2026, Kalshi will partner with CNN and CNBC, allowing viewers to check real-time prediction probabilities through news tickers. Both Polymarket and Kalshi have already partnered with Google, while companies like Robinhood, Fanatics, and Coinbase have entered the market through partnerships or native applications. In November 2025, Robinhood's prediction market contract volume reached 3 billion contracts, a 20% increase from the previous quarter, confirming the large-scale participation of retail investors.
Technological advancements have driven breakthroughs in infrastructure, including the following: multi-chain scalability enabled by platforms such as Polygon, Solana, Base, and Gnosis Chain; integration of AI oracles to enable permissionless and instant settlement; and the adoption of hybrid automated market maker (AMM) and order book models to reduce transaction friction and improve liquidity. In contrast, when the early platform Augur was launched, both the technological and regulatory environments were immature, making its development extremely challenging.
Market Dynamics: Market Leaders and Challengers
Although Polymarket is currently the leading platform in the industry, its position could still face challenges from competitors, offering users more choices. In fact, 12 institutions either submitted applications or successfully obtained the "Designated Contract Market (DCM)" designation in 2025, a 500% increase from the previous year. Additionally, other companies are seeking to partner with DCMs to provide prediction market services under the identity of "futures commission merchants."
Here is a brief comparison between Polymarket and the Opinion platform (data period: 30 days up to December 3, 2025):
· Polymarket key data: open interest of $247.1 million; notional trading volume of $4.39 billion; holds 82% of the total market share in industry total value locked (TVL); employs a historical zero-fee model, driving user growth.
· Opinion Key Data: TVL surged by 110% within 30 days (from $30 million to $63 million); estimated monthly trading volume of $4 billion, posing potential disruption to existing market shares; achieved product-market fit on emerging Layer2 infrastructure.
Network effects and a "winner-takes-all" market structure are attracting significant growth capital—these platforms offer scalable, diversified alternatives to traditional derivatives and betting products. Their revenue models have also moved beyond a single reliance on transaction fees, including: licensing real-time probability data to news media and financial terminals; API integrations with social platforms and applications; and some companies (such as Robinhood) even use this as a means to cross-sell core financial services.
User Behavior Shift
Traders are gradually shifting toward prediction markets, which have a more sophisticated speculative structure and can serve both as hedging tools and a source of alpha returns for decentralized finance (DeFi) portfolios. Since real-time prediction probabilities have proven more accurate than traditional polls in forecasting political and economic events, this migration trend may also extend to more event-related contracts.
Although Polymarket initially attracted media attention due to political predictions, it is not limited to this area. Its largest markets in terms of open interest include:
· Non-election political field: $55 million
· Cryptocurrency sector: $52 million
· Business Field: 36 million USD
· Election field: $22 million
Popular Culture Field: $20 million
· Sports field: 20 million USD
Total: $242 million
New entrants are continuously emerging: Crypto.com has partnered with Hollywood.com to launch a prediction market centered on entertainment, covering topics such as movies, television, theater, actors, musicians, and award winners. Meanwhile, Limitless focuses on short-term prediction markets for cryptocurrency and stock prices. The platform originated from an X (formerly Twitter) project and has received investment support from Coinbase and 1confirmation.
Controversies, Challenges, and Emerging Solutions
Predictive markets still face several pain points, including centralization risks, manipulation issues under traditional oracle models, and settlement delays caused by manual reporting systems.
Gray areas in regulation still exist, including the classification dispute over sports betting. For example, in November 2025, a Nevada judge ruled that Kalshi is a gambling platform and cannot be exempt from the state's gambling regulations. However, Kalshi argues that its platform is a federally regulated financial trading platform, offering legal derivative contracts (event-based contract swaps) rather than gambling wagers. After the ruling, Kalshi has initiated an appeal process, and similar disputes have also emerged in Massachusetts.
Regardless of the outcome of the case, several issues remain to be resolved, including age restrictions and concerns related to responsible gambling. Cross-border regulatory arbitrage may also become a barrier to industry development.
Market manipulation risks also need to be managed, for example: the impact of large players on illiquid markets, wash trading and price manipulation in decentralized environments, and the challenge of balancing "permissionless trading" with "market integrity."
The current market structure is continuously evolving, including the introduction of perpetual prediction markets for "ongoing outcomes," combinatorial markets for handling complex multivariate events, and bonding curve mechanisms for enhancing dynamic liquidity. Additionally, multiple opportunities exist: using prediction market probabilities as oracle inputs for DeFi protocols; enabling secondary trading and leverage through tokenized positions; and integrating prediction markets with yield strategies and portfolio hedging.
The emerging solutions focus on three key directions: providing AI-driven instant settlement for permissionless markets; integrating trading platform oracles to reduce front-running; and developing application chains with embedded consensus mechanisms to ensure oracle reliability.
Future Outlook
From the current perspective, three major factors will drive the broader adoption of prediction markets in the short term: U.S.-based platforms approved by the CFTC launching through established brokers; integration with social platforms (such as embedding prediction APIs within tweets); and emerging banks incorporating prediction markets to merge financial and speculative functionalities.
In addition, as prediction markets gradually evolve into an independent category of financial markets, vertical prediction markets focusing on specific areas such as sports, business, and others may emerge. For example, Novig, a sports-centric prediction market, is dedicated to creating highly customized markets and user experiences for sports betting users. As prediction markets become more common consumer behavior, these specialized platforms may offer a better user experience than one-size-fits-all comprehensive platforms.
In the next 1–3 years, prediction markets focused on privacy protection may adopt zero-knowledge proof technology. Governance applications such as prediction-based governance (Futarchy) and outcome-based decision-making may also gradually develop.
(Note: "Futarchy" is a novel governance concept proposed by economist Robin Hanson around the year 2000. Its core idea is to guide decision-making based on predictions about future outcomes, rather than relying on traditional voting, expert judgment, or hierarchical authority. The term is a combination of "future" and "archy" (governance or rule), and can be directly translated as "prediction-based governance" or "future-oriented governance.")
However, the industry may still face obstacles, including: regulators tightening controls and restricting global access or product scope; if the market fails to improve prediction accuracy, it could lead to user fatigue; and traditional platforms adopting blockchain technology will trigger even more intense competition.
As the integration deepens further, prediction markets will bring about a range of positive social impacts: providing collective intelligence support for resource allocation and policy decision-making; establishing decentralized prediction as a public infrastructure; and promoting the transition of media and governance from the "opinion poll model" to the "participatory prediction market model."
The question today is no longer whether prediction markets can scale, but rather how many prediction markets will emerge in the future, and which models will capture this trillion-dollar opportunity—pricing uncertainty in the real world on-chain. These predictions will become a significant complement to human intelligence and forecasting capabilities.
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