Prediction Markets and What Comes Next

The Current State of What Counts as Investing

Prediction markets, markets that let people trade contracts on the outcome of real world events have gone from academic curiosity to cultural phenomenon to institutionalised financial infrastructure in the space of a few decades.

These markets have undergone a staggering expansion, growing roughly 130-fold in two years as online bettors gravitate toward contracts tied to sports, politics and cultural moments. Monthly volumes on platforms like Polymarket and Kalshi jumped from under $100 million in early 2024 to more than $13 billion by late 2025.

Today, they are at the centre of a debate that isn’t just semantic: Is this still investing or a glorified form of gambling?

Why It's Harder to Tell Gambling From Investing Nowadays

As Bloomberg’s Why It’s Harder to Tell Gambling From Investing Nowadays argued, the speculative tools of modern markets—from zero-days-to-expiry options (0DTEs) and leveraged ETFs—to memecoins, tokenised stocks, and event contracts tied to everything from the Consumer Price Index to the NFL have collapsed time horizons and amplified volatility. In doing so, they have made traditional definitions of investing increasingly difficult to sustain.

Prediction markets sit at the heart of this fusion. They offer real risk transfer and hedging functions, but the retail UX often feels like a sportsbook. Their prices are probabilities, the market’s aggregate belief is about what will happen, yet the behavioural dynamic often resembles gambling psychology more than disciplined hedging.

The Maduro Episode: Insider Trading?

This debate crossed a legal and ethical threshold when traders made large, precisely timed bets on Nicolás Maduro’s removal, just hours before U.S. forces captured him. In one case, a newly created wallet turned roughly $32,000 into more than $400,000 in profit on Polymarket. 

Controversy erupted when:

• Polymarket refused to pay out certain invasion-related contracts on the basis that the U.S. didn’t technically “invade” under the platform’s terms even though the military operation occurred and Maduro was detained. The market has attracted over $11 million in wagers, largely clustered around a January 31 deadline, with residual bets rolling into March and December expiries. Some traders including those who staked five-figure sums on a U.S. invasion have since flooded Polymarket’s comment threads with complaints.
• Legislators, including Representative Ritchie Torres, proposed a bill (the Public Integrity in Financial Prediction Markets Act of 2026) aimed at criminalising insider trading in prediction contracts, especially by government insiders with privileged information. 

From Crowd Wisdom to Dopamine Markets: A Brief History

Early academic roots (1980s–1990s). Prediction markets began as an idea in social science and economics: if you let people stake money on outcomes, the resulting prices might aggregate dispersed information and outperform polls or expert forecasts. The Iowa Electronic Markets pioneered this concept by letting students trade on U.S. election results with small amounts of real money; prices often proved better indicators of outcomes than major polls. 

Internet boom and niche trading (2000s–2010s). Platforms such as Intrade and later PredictIt brought the idea online. PredictIt, owned by a university-based research project operated under a CFTC no-action framework and explored political and economic event markets with real bets. 

Regulated experiments (2020s). By the early 2020s, the idea matured into regulated derivatives markets. 

Kalshi, launched in 2021 as a CFTC-approved designated contract market offering event contracts on economic indicators and policy outcomes, represented a major step toward real financial legitimacy. In parallel, Polymarket, a crypto-based platform founded in 2020, became one of the most visible prediction markets, processing billions of dollars in event contracts though initially outside compliant U.S. derivatives frameworks. 

2025–2026: The Big League Arrives

By late 2025, prediction markets had ceased to be fringe experiments, as both Polymarket and Kalshi, the biggest businesses in the sector, have received multibillion-dollar valuations in recent months.

Kalshi raised $1bn at an $11bn valuation from investors including crypto investment firm Paradigm, Sequoia, Andreessen Horowitz and CapitalG.

Intercontinental Exchange (ICE), the owner of the New York Stock Exchange said it would invest up to $2 billion in Polymarket at an ~$8 billion valuation, signalling that event-based trading can be a core data product and institutional feed. 

CME Group teamed up with FanDuel to offer event contracts linked to sports, economic indicators, and major indexes, further blurring traditional market boundaries. 

Robinhood, which has built its own prediction-markets hub, reported that these products are among its fastest-growing revenue segments, reaching hundreds of millions of funded retail users and processing billions in event contracts. 

A coalition of operators including Kalshi, Coinbase, Robinhood and Crypto(dot)com formed an industry alliance to advocate for prediction markets and integrity standards. 

These developments reflect a seismic shift: markets once dismissed as “just bets” are now financial products embedded in mainstream apps, brokerages and derivatives infrastructure.

Food for Thought

Prediction markets are more than bets on elections or sports. They are real-time markets for belief, where probabilities turn into prices and future outcomes become assets to be traded. The industry’s evolution from academic experiment to regulated derivatives to institutional capital inflows reflects both the innovation and the tension at the core of modern finance. 

The question then becomes: what happens when profit incentives meet unequal access to information in markets designed to price the future?

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