Title: State of Prediction Markets

Author: Paul Veradittakit, Partner at Pantera Capital

Compiled by: Saoirse, Foresight News

Summary

· Prediction markets are not new—now they are finally decentralized. Humans have long invested funds based on predicted outcomes, but blockchain technology has transformed this ancient practice into a permissionless, transparent global marketplace. In these markets, prices reflect real-time collective intelligence rather than poll results.

· Infrastructure and regulation drive market expansion. Clear regulatory stance from 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 sector with weekly trading volume of $3.9 billion. Related platforms are directly integrated into brokerages, media, and consumer apps.

· “Uncertainty” becomes a new asset class. As prediction markets evolve into core infrastructure for hedging, data, and forecasting, platforms that combine liquidity, credibility, and coverage—able to price real-world outcomes globally—will continue to accrue value.

For thousands of years, humans have explored ways to leverage collective intelligence to predict the future. Ancient Greeks used exclusive tokens to cast votes through a pipeline system; juries of the time expressed verdicts with solid or perforated stones. In the taverns of that era, “kapeleia,” private betting was surely common.

In 17th-century Amsterdam stock exchanges, merchants bet on ship arrival times; in 19th-century America, political betting venues dominated during elections until bans in the 1940s. Additionally, Chicago commodities futures trading falls into this category. Clearly, humans have long understood that investing in predicted outcomes can generate highly valuable informational signals.

Today, driven by blockchain technology, prediction markets are a digital renaissance of this ancient practice—distinguished by key differences: permissionless, transparent, open, and global.

Information Market Revolution: What Makes Crypto Prediction Markets Unique?

Traditional prediction markets require trusted intermediaries to hold funds, verify results, and pay out winnings. Blockchain technology eliminates these middlemen. When you place a bet on Polymarket about geopolitical, macroeconomic, or cultural questions—whether “Will the Fed cut rates in January?” or “Who will win Best Picture at the 2026 Oscars?”—your funds are held by smart contracts, results are fully transparent, and winnings are automatically paid in USDC. The entire process requires no bank accounts, has no geographic restrictions, and involves no middlemen or participant qualification barriers.

Another major player, Kalshi, focuses 90% of its business on sports, covering topics like “PGA Farmers Insurance Open Champion” or “Kent State vs. Akron basketball results.” Emerging prediction platforms like Novig are also dedicated to sports.

Why Now? The Moment of Convergence

Currently, prediction markets see a weekly trading volume of $3.9 billion, with explosive growth driven by three factors: regulatory maturation, integration with traditional finance, and infrastructure breakthroughs.

Regulatory clarity is key. For example, the CFTC’s approval has cleared obstacles for platforms operating in the U.S. In July 2025, Polymarket acquired CFTC-licensed derivatives trading platform QCX LLC and clearinghouse QC Clearing LLC. This enables traders to confidently participate in prediction contracts on Polymarket with clear rules. Kalshi’s $1.1 billion valuation and $1 billion funding round in December 2025 also reflect institutional confidence. Overall, clearer regulation is unlocking institutional capital and retail participation through mature brokerage channels.

Intercontinental Exchange (ICE) invested $2 billion in Polymarket and will serve as a global distributor of Polymarket’s event-driven data—highlighting the trend of traditional finance and prediction markets converging.

Partnerships deepen this integration. Polymarket’s multi-year partnership with TKO Group Holdings makes it the official exclusive partner of UFC and Zuffa Boxing, directly combining prediction market tech with live fan experiences.

In 2026, Kalshi will partner with CNN and CNBC, allowing viewers to see real-time prediction probabilities in news tickers. Both Polymarket and Kalshi have partnered with Google; companies like Robinhood, Fanatics, and Coinbase are also entering via collaborations or native apps. In November 2025, Robinhood’s prediction market contracts traded 3 billion units, up 20% month-over-month, demonstrating large-scale retail engagement.

Technological advances have driven infrastructure breakthroughs, including multi-chain scalability via Polygon, Solana, Base, Gnosis Chain; integration of AI oracle systems for permissionless instant settlement; and hybrid AMM and order book models to reduce trading friction and improve liquidity. Early platforms like Augur faced challenges due to immature tech and regulatory environments, hindering growth.

Market Dynamics: Leading Players and Challenges

While Polymarket remains the dominant platform, its position may face competition offering more choices. In 2025, 12 institutions either applied for or obtained “Designated Contract Market (DCM)” status—five times more than the previous year. Some companies seek DCM partnerships to offer prediction markets as “futures commission merchants.”

Here’s a brief comparison of Polymarket and Opinion (data as of December 3, 2025, over 30 days):

· Polymarket key data: Unsettled contracts worth $247.1 million; nominal trading volume $4.39 billion; accounts for 82% of the industry’s total value locked (TVL); zero-fee model driving user growth.

· Opinion key data: 110% increase in TVL over 30 days (from $30 million to $63 million); estimated monthly trading volume of $4 billion, potentially disrupting existing market share; product-market fit on emerging Layer 2 infrastructure.

Network effects and the “winner-takes-all” market are attracting significant growth capital—these platforms provide scalable, diversified options for traditional derivatives and betting products. Revenue models are expanding beyond simple fees, including licensing real-time probability data to media and financial terminals, API integrations with social platforms and apps, and cross-selling core financial services (e.g., Robinhood).

User Behavior Shift

Traders are increasingly turning to prediction markets—these markets have more mature speculative structures, serving as hedging tools and providing alpha returns for DeFi portfolios. Because real-time prediction probabilities outperform traditional polls in politics and economics, this trend may extend to other event-based contracts.

While Polymarket initially gained media attention for political predictions, it is not limited to that. Its largest unsettled markets include:

· Non-election politics: $55 million

· Cryptocurrency: $52 million

· Business: $36 million

· Elections: $22 million

· Pop culture: $20 million

· Sports: $20 million

· Total: $242 million

New entrants continue to emerge: Crypto.com and Hollywood.com launched entertainment-focused prediction markets covering movies, TV, theater, actors, musicians, and awards; Limitless specializes in short-term crypto and stock price predictions, originating from the X (formerly Twitter) project, backed by Coinbase and 1confirmation.

Controversies, Challenges, and Emerging Solutions

Prediction markets still face issues such as centralization risks, manipulation under traditional oracle models, and settlement delays caused by manual reporting systems.

Regulatory gray areas persist, including classification disputes over sports betting. For example, in November 2025, a Nevada judge ruled Kalshi as a gambling platform, subject to state gambling laws. Kalshi argues its platform is a federally regulated financial trading platform offering legitimate event-based derivatives, not gambling. Kalshi has appealed, and similar disputes have arisen in Massachusetts.

Regardless of outcomes, issues like age restrictions and responsible gambling remain. Cross-border regulatory arbitrage could also hinder industry growth.

Market manipulation risks must be managed—such as large traders impacting low-liquidity markets, wash trading and price manipulation in decentralized environments, and balancing permissionless trading with market trustworthiness.

The market is evolving to include perpetual prediction markets for “continuous outcomes,” combinatorial markets for complex multi-variable events, and dynamic liquidity bonding curves. Opportunities also exist in using prediction market probabilities as oracle inputs for DeFi protocols, tokenized positions for secondary trading and leverage, and integrating prediction markets with yield strategies and portfolio hedging.

Emerging solutions focus on three main directions: AI-driven instant settlement for permissionless markets; oracle integration to reduce front-running; and developing application chains with embedded consensus mechanisms to ensure oracle trustworthiness.

Future Outlook

In the near term, three factors will drive broader adoption: U.S. platforms approved by the CFTC via established brokerages; social media integration (e.g., embedding prediction APIs in tweets); and new banking integrations that combine financial and speculative functions.

Additionally, prediction markets are likely to evolve into a standalone financial asset class, with vertical prediction markets for specific sectors like sports and business. For example, Novig, focused on sports, aims to create highly customized markets and user experiences for sports betting users. As prediction markets become more mainstream consumer behaviors, these vertical platforms may offer better user experiences than one-size-fits-all comprehensive platforms.

Over the next 1-3 years, privacy-focused prediction markets may adopt zero-knowledge proof technology; governance models like Futarchy and outcome-based decision-making could also develop gradually.

(Note: “Futarchy” is a governance concept proposed around 2000 by economist Robin Hanson, centered on using “prediction of future outcomes” to guide decisions rather than traditional voting, expert judgment, or hierarchical authority. The term combines “future” and “archy” (rule/governance), and can be translated as “predictive governance” or “future-oriented governance.”)

However, the industry may face obstacles such as tighter regulation limiting global access or product scope; if prediction accuracy cannot be improved, user fatigue may occur; and competition will intensify as blockchain adoption spreads.

As integration deepens, prediction markets will bring positive societal impacts—supporting resource allocation and policy decisions through collective intelligence; establishing decentralized prediction as public infrastructure; and driving media and governance shifts from “polling” to “participatory probability markets.”

The current question is no longer “Can prediction markets scale?” but “How many prediction markets will emerge?” and “Which models will seize this trillion-dollar opportunity—pricing real-world uncertainty on-chain?” These forecasts will become vital complements to human wisdom and predictive capacity.

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