Market Prediction Goldmine Guide: How Polymarket and Kalshi Become the "Truth Machines" of Wall Street

A Tumultuous Market Revolution

Betting with real money on the future is becoming an asset pricing method recognized by Wall Street institutions.

The concept of prediction markets is not entirely new. In 1988, the Iowa Electronic Market first proposed the idea that “price equals probability.” Over the following 16 years, its election prediction accuracy exceeded 74% of public opinion polls. But the true explosive growth awaited the intervention of blockchain technology—realizing trustless settlement through smart contracts, which completely dismantled regulatory barriers for prediction markets.

The outcome of the 2024 US presidential election will be decisive for this industry. During the election, trading volume in prediction markets soared to nearly $2 billion per week. Polymarket set Trump’s win probability at 99% at 1:30 AM Eastern Time, well before major media announced the results. At this moment, the door from the crypto community to mainstream finance was swung open.

Who Is Profiting: The Ecosystem Map of Market Participants

The prosperity of prediction markets is not a linear growth but a collective entry of various players.

Machine learning teams have become new gold diggers. The Synth team uses AI signals to predict the 1-hour and 24-hour price trends of crypto assets, then places corresponding bets on Polymarket. This approach turned a $3,000 principal into $15,000 within a month, a 500% return. Similar teams include Sportstensor, Sire, Billy, and others, all doubling down on prediction markets, continuously refining their signals and models.

Individual arbitrageurs profit by exploiting price dislocations. For example, on Kalshi, a trader bought contracts about Taylor Swift and Travis Kelce’s engagement at $0.37, ultimately earning $50,000. Stories like these frequently appear in the media, fueling a surge of entertainment industry users.

Institutional investors are beginning to use prediction markets for risk hedging. In 2025, the trading volume on Polymarket regarding Federal Reserve rate decisions exceeded $50 million, with investors betting on the probability of a “25 basis point hike” to achieve precise hedging needs.

A Major Shift in Market Landscape

Between 2024 and 2025, the leadership in prediction markets experienced subtle changes.

Polymarket remains the icon of decentralized prediction markets. Its cumulative trading volume has surpassed $18.1 billion, with a peak of $2.63 billion during the November 2024 election, roughly 1,000 times the early data from December 2020. During the election, over 60% of transactions were related to “politics/economics,” with weekly trading volume once exceeding $1 billion.

However, entering 2025, Polymarket’s trading structure quietly shifted. After political enthusiasm waned, the focus gradually moved to “sports” and “crypto assets”—Super Bowl-related contracts traded about $1.1 billion, and Bitcoin prediction markets exceeded $15.5 million.

Kalshi demonstrated the most remarkable growth momentum. By October 2025, its weekly trading volume accounted for 55%-60% of the entire market, officially surpassing Polymarket to become the most liquid prediction platform. Kalshi’s secret weapon is its regulatory advantage—it successfully bridged Web2 channels, with total trading volume exceeding $10 billion and over 40 million trades. This indicates that ordinary non-crypto users are also entering in large numbers.

The Truth Behind the Weekly Trading Volume Breaking $3 Billion

In October 2025, prediction markets set a new record—weekly nominal trading volume first exceeded $3 billion. Behind this figure reflects profound changes in market structure.

From simple event-driven trading to ongoing financial activities, both capital depth and user base hit new highs. The total weekly active users in the entire market surpassed 225,000, with Polymarket’s peak monthly active traders reaching 450,000 in January 2025. Even after political fervor subsided, the platform maintained over 260,000 active users.

More importantly, the stability of open interest contracts. During the 2024 election, the entire market’s open interest peaked near $800 million. By the second half of 2025, total open interest steadily rebounded and stabilized between $500 million and $600 million. This indicates that participants are no longer short-term speculators but genuine capital allocators.

The Underlying Logic of “Options Democratization”

Prediction markets are essentially an experiment in financial democratization—repackaging complex options products into forms anyone can participate in.

Compared to understanding Greeks (Δ, Γ, Θ, etc.) and complex options pricing models, prediction market users only need to make a simple choice: buy Yes or buy No. The significantly lowered entry barrier has sparked widespread participation.

Crypto culture has also deeply integrated into this process. Most prediction platforms use USD stablecoins for settlement, providing users with seamless deposit and withdrawal experiences. By 2025, with the introduction of token incentive models, a “liquidity mining” craze even emerged—users could not only find mispricing opportunities for arbitrage but also earn token rewards.

The Double-Edged Sword of Regulation and Technology

The future of prediction markets is not without obstacles. In September 2025, the US CFTC approved Polymarket’s return to the US market, but official Kristin Johnson warned that regulatory safeguards are insufficient, lacking full market visibility. Prediction markets sit in a gray area between gambling and financial derivatives, and how to define their nature remains unresolved.

Liquidity shortages are also a practical constraint. Most prediction markets’ funds are concentrated on a few hot events, while long-tail markets lack liquidity, making prices for niche events less meaningful. This directly impacts accuracy—2025 reports show that low liquidity prevents large hedging demands from being fully met.

But opportunities also emerge amid these challenges. Through AMM mechanisms, NFT transformations, and lightweight mobile interfaces, the participation threshold in prediction markets is continuously lowering. Polymarket’s mobile optimization in 2025 directly drove a 20% increase in user growth.

Imaginative Future Space

More radical ideas are brewing. Prediction markets may deeply integrate with DeFi and AI, ushering in the so-called “Dynamic DeFi Era.” Imagine a new DeFi protocol that automatically leverages or deleverages based on asset prices in prediction markets, rebalancing liquidity provider positions—driven entirely by AI and machine learning.

This is not a fantasy. ICE, the parent company of the New York Stock Exchange, plans to invest about $2 billion in Polymarket. This move is seen within the industry as a formal recognition of Web3 mode by top-tier financial infrastructure.

When people bet their real money on their beliefs, the market becomes the closest place to the truth. And prediction markets are proving that this truth can be quantified, traded, and even profitably exploited.