For a long time, prediction markets have been labeled as "academic experiments," "tools for election season public opinion," or even "derivatives of sports betting." They always seemed tied to high-profile scenarios, rarely recognized as true financial infrastructure.
But the data from 2026 is rewriting that narrative.
From the precise forecasts of the 2024 US presidential election, to the $7.18 billion in sports trading volume during the first week of the 2026 FIFA World Cup, and the leading platforms both surpassing $10 billion in valuation—prediction markets are undergoing a transformation reminiscent of the early days of options markets: from specialization to institutionalization to becoming core infrastructure. What began as a niche tool for event-based trading is steadily evolving into financial infrastructure that prices real-world uncertainty.
Exponential Growth in Market Size
The rise of any financial infrastructure depends on two prerequisites: a sufficiently large market and a steep growth curve. Prediction markets now meet both criteria.
Looking back at 2024, the total trading volume across the sector was just $15.8 billion. By 2025, that figure had soared to $63.5 billion—an almost fourfold increase year-over-year. The growth accelerated further in 2026: in Q1 alone, global prediction market trading volume jumped to $75 billion, compared to only $440 million in the same period of 2024. In just two years, the industry has achieved exponential growth.
On a monthly basis, January 2026 saw industry trading volume surpass $21 billion—over 170 times the volume of January 2025. In May, monthly trading reached $29.4 billion, and the first week of June added another $6 billion. Just a year earlier, monthly volume was only $1.2 billion. Even more notably, in June 2026, data disclosed by a16z crypto showed that weekly trading volume in prediction markets hit $10.8 billion for the first time—a new all-time high.
Analysts at investment bank Bernstein estimate that total trading volume in 2026 will reach $240 billion, a staggering 370% increase over 2025. Institutional investors are even more focused on the long-term outlook: assuming a compound annual growth rate of about 80% from 2025 to 2030, annual prediction market volume could exceed $1 trillion by 2030.
Such a growth trajectory is rare in the financial sector. For an emerging industry still in its early stages, these numbers make it clear—the market is betting on a new financial infrastructure on the verge of explosive growth.
From Election Tool to All-Scenario Coverage
Prediction markets are becoming financial infrastructure because their use cases now extend far beyond their original role in election forecasting.
During the 2024 US presidential election, Polymarket users accurately predicted Trump’s victory a month in advance, bringing the platform into the mainstream spotlight. Academic research found that Polymarket outperformed traditional polls in forecasting the 2024 election, especially in swing states.
But what truly changed the industry narrative came after the election: trading volume did not vanish when the election ended. The sports market picked up the momentum. By the end of 2025, sports accounted for 85% of Kalshi’s trading volume, while technology and science markets grew by 1,637% year-over-year, and economic markets by 905%. Categories like entertainment, crypto, politics, and culture are now showing even stronger user growth and better trading retention.
The 2026 FIFA World Cup further expanded the market. Polymarket’s World Cup champion contract alone saw trading volume exceed $3 billion. In the first week of the World Cup, nominal sports trading volume in prediction markets reached $7.18 billion—a new record.
A recent report from Korean venture capital firm Hashed noted that prediction markets are evolving from simple betting platforms into "next-generation information infrastructure" that harnesses collective intelligence, with potential applications even in evaluating AI’s predictive capabilities. By 2026, prediction markets are no longer defined as "gambling" or "derivatives." Instead, they are being redefined as decentralized systems for information aggregation and pricing.
Institutional Capital Accelerates Entry
If prediction markets once resembled a retail investor’s game, the most significant change in 2026 is the rapid entry of institutional capital.
In March 2026, Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, completed a $600 million investment in Polymarket. Both Polymarket and Kalshi were reportedly in talks for new funding rounds at valuations around $20 billion. Specifically, after its latest funding round, Kalshi’s valuation doubled to $22 billion from $11 billion in December 2025; Polymarket’s valuation is believed to have risen to $15 billion.
These signals clearly indicate that prediction markets are gaining recognition from mainstream finance.
The core driver for institutional investors entering prediction markets is the arbitrage opportunities created by pricing inefficiencies. Strategies include cross-platform arbitrage (exploiting price discrepancies for the same event across different markets), microstructure arbitrage (leveraging differences in liquidity distribution and matching mechanisms), and news-driven trading (using superior information processing speed to adjust pricing immediately as events unfold).
At the same time, quantitative firms like DRW, Wintermute, and IMC have begun to establish a presence in prediction markets. Platforms like Kalshi are actively courting leading institutional investors and hedge funds. According to Reuters, a significant number of hedge funds and institutional investors are closely monitoring trading opportunities in prediction markets.
As the market shifts from retail speculation to institutional participation, the financial attributes of prediction markets are being fully realized.
Breakthroughs in Regulatory Frameworks
No financial infrastructure can operate outside the scope of regulation for long. In 2026, prediction markets achieved a historic breakthrough in regulatory frameworks.
At the end of 2025, Polymarket acquired QCX, a derivatives exchange regulated by the CFTC, securing a compliant pathway back into the US market. This move had implications beyond a single platform—it set a regulatory precedent for the entire sector, lowering the entry barrier for institutions and compliant capital.
On June 10, 2026, the US Commodity Futures Trading Commission (CFTC) released a 267-page proposed rulemaking, planning major changes to how event contracts are reviewed. The framework introduces a 90-day review process for specific event contracts submitted by registered exchanges. The CFTC also issued its first regulatory draft specifically for prediction markets, aiming to establish standardized review procedures for determining which event contracts serve the public interest.
Meanwhile, the CFTC’s enforcement division designated prediction markets as one of its top five enforcement priorities, with a focus on cracking down on insider trading, market manipulation, and wash trading. In Q1 2026, the CFTC released an enforcement framework targeting insider trading in prediction markets, establishing clear operating rules for the industry.
Bipartisan digital asset legislation expected to pass in fall 2026 will further legitimize on-chain prediction tools, tokenized assets, and stablecoin settlement. As regulatory clarity improves, institutional capital will only accelerate its entry.
A Self-Sustaining Business Model
On March 30, 2026, Polymarket ended its long-standing zero-fee policy and began charging taker fees across core categories such as crypto, sports, politics, and finance. The fee structure is variable, with crypto fees peaking at 1.8% and actual charges dynamically adjusted according to market conditions. Just two days after the change, daily platform revenue surpassed $1 million.
This shift marks the completion of prediction markets’ transition from "burning cash for growth" to a self-sustaining business model, providing a financial foundation for sustainable development. When a sector can generate consistent revenue from its own trading activity, it no longer relies on external capital to sustain operations—one of the defining characteristics of true financial infrastructure.
The Hidden Costs of Rapid Expansion
Every fast-growing sector faces structural challenges. Prediction markets, amid their rapid expansion, have exposed several key risks.
The first risk: "fat tail" liquidity distribution. Liquidity is abundant in top markets, but most long-tail prediction topics suffer from insufficient depth. When users take positions in less popular events, slippage can reach 10% or more. This uneven liquidity distribution limits the effectiveness of prediction markets as "information aggregators"—only high-attention events provide reliable price signals, while long-tail predictions lose pricing efficiency due to lack of liquidity.
The second risk: insider trading and market manipulation. At the end of May 2026, US authorities charged a Google engineer with insider trading. The Department of Justice has begun investigating multiple cases of potentially time-sensitive insider bets. Regulators have shifted from "watching" to "acting," and compliance costs for the industry are rising sharply.
The third risk: pressure from sports leagues and government agencies. The NFL has formally requested that Kalshi and Polymarket stop offering event contracts deemed "susceptible to manipulation." Congress has introduced several bills aimed at restricting government officials from leveraging information advantages in prediction trading. At the end of April 2026, Brazil’s National Monetary Council issued Resolution No. 5,298, banning derivatives contracts based on non-economic events and shutting down around 27 to 28 prediction platforms at once.
Prediction markets now face mounting pressure from content rights holders, policymakers, and foreign regulators.
Conclusion
Can prediction markets become financial infrastructure? The answer is becoming increasingly clear.
From a market size perspective, the Q1 2026 trading volume of $75 billion, the full-year projection of $240 billion, and the potential $1 trillion mark by 2030 all point to prediction markets having the necessary scale for financial infrastructure.
From an application perspective, prediction markets have expanded from election bets to cover sports, technology, economics, entertainment, crypto, and more—addressing every facet of real-world uncertainty.
From a participant perspective, established financial players such as Intercontinental Exchange, hedge funds, and quant firms are accelerating their entry, making institutionalization an irreversible trend.
From a regulatory perspective, the CFTC has issued a regulatory draft and enforcement framework specifically for prediction markets, and the path to compliance is rapidly advancing.
From a business model perspective, leading platforms have shifted from zero-fee to fee-based models, completing the loop for self-sustaining operations.
Of course, for prediction markets to truly stand alongside stocks, bonds, and derivatives as core financial infrastructure, they must still resolve structural issues like uneven liquidity distribution, insider trading risks, and cross-border regulatory coordination.
But the direction is clear. Prediction markets are evolving from a marginal event trading tool into a new form of financial infrastructure for pricing real-world uncertainty.
FAQ
Q1: How do prediction markets differ from traditional futures and options markets?
Prediction markets are based on real-world events (such as election outcomes, sports matches, or economic data), not traditional commodities or financial assets. Prices in prediction markets directly reflect the collective judgment of the probability of an event occurring, serving as an information aggregation mechanism. Traditional derivatives markets, by contrast, mainly serve risk hedging and price discovery, with underlying assets typically being tradable financial instruments or commodities.
Q2: Are prediction market prices really more accurate than polls?
Academic research shows that prediction markets have unique advantages in aggregating dispersed information. For example, in the 2024 US presidential election, Polymarket outperformed traditional polls in forecasting swing state outcomes. This is because prediction markets require participants to put real money behind their opinions, incentivizing those with an information edge to participate in pricing, which leads to more effective price signals.
Q3: What are the biggest risks facing prediction markets?
The main risks currently fall into three categories: First, insider trading—those with non-public information can profit before event outcomes are known. Second, uneven liquidity distribution—insufficient depth in less popular events leads to poor pricing efficiency. Third, regulatory uncertainty—legal definitions of prediction markets vary by country, with some jurisdictions classifying them as gambling and imposing outright bans.
Q4: How can regular users participate in prediction market trading?
Users can participate in prediction market trading via the Gate platform. Gate is the world’s first centralized exchange to integrate with Polymarket. Users can directly access the Polymarket page from the Alpha section on the Gate App homepage and use their account’s USDT to participate in event predictions. This integration dramatically lowers the entry barrier for regular users, making what once required connecting wallets and managing private keys as simple as spot trading.
Q5: What is the long-term outlook for prediction markets?
Bernstein forecasts that annual prediction market trading volume could exceed $1 trillion by 2030. Key drivers include the increasing frequency of major macro events, the gradual establishment of regulatory frameworks, accelerating institutional capital inflows, and growing demand for high-quality information pricing tools in the AI era. Prediction markets are evolving from "event trading tools" into dual roles as both "information infrastructure" and "financial infrastructure."
