The Rise of Prediction Markets: 2026 Growth & Institutional Use

The rise of prediction markets over the last year has caught many investors off guard. These platforms combine forecasting, gamification, and gambling to create a unique experience and provide valuable data on sometimes hard-to-register sentiments.

Here’s why prediction markets are on the rise and why major institutions continue to turn towards these platforms for insight.

What are Prediction Markets?

Prediction markets are exchanges that allow you to trade contracts based on the outcome of events. Have you ever thought you knew for sure how a particular election, asset, or even a bit of legislation would turn out?

Prediction markets enable you to “put your money where your mouth is.” These platforms use contracts set at fixed amounts that reflect the market’s belief in the event occurring.

For example, if you see a $1 Yes contract trading for $0.70, it means that 70% believe the event will occur. In this way, these markets enable communities to forecast and speculate on everything from market movements to the weather.

Popular Prediction Market Categories

These unique exchanges enable traders to monetize nearly any forecast or prediction you have, as long as the outcome is trackable. Aside from the obvious sports markets, here are some key sectors that prediction markets are already covering.

Economics

There are several prediction markets based on economic factors. These can range from simple stock-based predictions like “TESLA (TSLA -2.35%) stock will rise or fall” to exact price movements. There are also larger market-wide predictions, such as whether the NASDAQ will grow.

Politics

Politics is another popular prediction market option. The political landscape has become more tense, leading to more passionate discussions, confrontations, and party members.

Political elections, regulations, and other legal metrics are readily available on prediction markets. There are bets on what party will win the overall midterms, down to specific legislation, and if it will pass or not, or get delayed.

Source – Kalshi

Crypto‑Related Events

Cryptocurrencies have been included on prediction sites since Bitcoin (BTC -10.75%) gained notoriety. As such, you can find a range of crypto-related predictions on these platforms today. Topics include everything from Bitcoin price movement to whether the SEC will pass pro-crypto legislation.

Prediction Markets vs. Gambling: Legal Status

Technically, yes, wagering money on uncertain future events does qualify as gambling. You can see this relation when you examine the business models side-by-side. For example, gambling is based on odds that get set by the bookmaker, whereas prediction markets have odds set by public opinion.

Legally, these platforms are seen as gambling platforms by legislators in most instances. Consequently, they are often regulated in the same manner as a sports betting platform, especially if they utilize USD for payments and bets.

Evolution of Prediction Markets: From Intrade to Blockchain

The history of prediction markets predates the internet, computers, and even today’s civilizations. The first recorded prediction markets in the West centered on religious and political figures, a theme that has stayed true to this day.

Italian high society would place bets on who the next pope would be in the 16th century. There’s still evidence of these wagers in the form of letters between bettors. Election betting saw a resurgence in Great Britain in the 18th century, where elites bet on political outcomes.

In 1988, the concept went digital via the University of Iowa’s Iowa Electronic Markets (IEM). This platform was one of the first digital real-money prediction markets to gain notoriety and is regarded by many as the predecessor to today’s options.

Intrade

Intrade was the first commercial public digital prediction market. This platform launched in the late 90s, growing into a premier option for prediction market traders.

This platform supported real money predictions on topics ranging from politics to the economy, and everything in between. The platform was also known for its obscure and niche market predictions as well.

Intrade accomplished something that other platforms before its launch couldn’t – it proved that these networks held valuable data. For example, Intrade successfully predicted both the 2008 and 2012 elections.

Sadly, Intrade’s ride to stardom was short-lived. The company was shut down shortly after it predicted the 2012 elections. The reasons for the shutdown centered on regulatory pressure and legal concerns.

Xanadu

Project Xanadu was another pioneer in the market. This platform centered on corporate predictions, such as whether a certain technology would be publicly available or even possible by said date. This approach differed from Intrade as it was specifically set up as a way to capture and share public sentiment on corporate issues.

Hollywood Stock Exchange

Not to be outdone, the entertainment industry launched the Hollywood Stock Exchange in 1996. This unique platform allowed traders to trade metrics like celebrity value, box office performance, and future role potential.

PredictIt

The Victoria University of Wellington launched PredictIt to experiment with low-cost yes/no prediction contracts. The platform proved to be a huge success, inspiring further innovation in the market.

Gnosis: The DeFi Prediction Market Pioneer

Gnosis launched in 2015 and was the first decentralized prediction market to gain popularity. The platform hosted a record-breaking ICO that secured $12.5M in 12 minutes via GNO token sales.

Gnosis used the Ethereum (ETH -10.31%) blockchain to provide a new level of transparency and efficiency to the prediction market sector. The platform also integrated a Conditional Tokens Framework (CTF) that enabled users to create markets and place bets directly.

Conditional Tokens Framework (CTF)

These tokens enjoyed the security of Ethereum and could be traded as easily as other cryptocurrencies. Gnosis was a game-changer in that it allowed anyone to create and bet on any event.

Keenly, the use of smart contracts ensured that the payouts came on time and did not require any third-party actions. Eventually, the project decided to launch its own blockchain called the Gnosis chain.

This decision made sense because, at the time, Ethereum was suffering from crushing congestion that saw transaction fees and delays increase. The Gnosis Chain, which originally launched as xDai Chain, provided lower fees, could support DeFi applications, and offered far better performance than Ethereum.

Prediction Market Growth Statistics and 2026 Outlook

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The prediction market continues to gain momentum monthly. According to analysts, the market accounted for $40B in trading volume in 2025, which represents 400% growth over 2024.

More users have gotten the prediction itch this last year than ever. Statistics reveal that the market is set to exceed 15M active users by the end of this year, with some forecasts going as high as $30-100B annual volume by the end of this decade.

Key Drivers Behind Prediction Market Adoption

There are a lot of reasons why prediction markets continue to gain users. For one, they enable traders to hedge discrete event risks. The ability to utilize additional information to make your prediction isn’t frowned upon the same way it is seen as insider trading on financial markets.

Accurate

Another reason why these platforms continue to gain support is that they have proven to be a valuable source of data. Platforms like Polymarket continually score +90% in terms of accuracy on key sectors like public elections and market movements.

This accuracy means that these platforms are seen as more than simply ways to make quick rewards. They are now a valuable tool that provides insight into public issues that may not have any other trackable metric.

Gamified Predictions

The integration of blockchain assets and prediction markets led to the gamification of the sector. These platforms combine the excitement of gambling with the research of investing, leading many to find the experience more rewarding than traditional betting.

Social Experience

Another reason why many traders have started using these platforms is simply for the social aspects. These platforms can spark lively discussion on key issues, including political or pop culture-related items.

This flexibility makes them feel like a social event where you can explore and discover new things. Additionally, prediction markets let you show your confidence in a particular outcome, more so than an empty post. For many, this experience is more satisfying than social media alone.

Lower Entry

The prediction market has a much lower entry bar than other betting platforms. This lower financial bar and learning curve work in these platforms’ favor, as the majority of prediction market users are younger than stock traders.

Less Stigma

Another reason why prediction markets are now popular is that they offer the same dopamine fix as gambling sites but without the added stigma. This scenario means that more people can participate without worrying about being ostracized or looked down on by their peers as having a gambling habit.

How Prediction Markets Have Become a Key Metric

The interesting thing is that prediction markets have gotten so good at their job that they are now seen as a vital source of info for traditional investors. Hedge funds, banks, and media now integrate prediction market odds into their analysis.

What are the Effects of Prediction Markets?

Prediction markets have helped make forecasting niche events a little easier. Also, they have become a vital component of the decision-making process for many firms.

Market Pricing

Ironically, prediction markets can influence the sectors they are meant to predict. For example, crypto and DeFi prediction markets can utilize an oracle to monitor prediction market sentiment, automatically pricing this feature into the asset.

Why are Prediction Markets Controversial?

There are several reasons why prediction markets are seen as a contentious topic. For one, they combine gambling, information gathering, and forecasting into an easy-to-swallow package that can lead to addiction issues. Here are some other concerns to consider:

Target Younger Traders

Examining the growth of the prediction market reveals that the majority of new users are young adults. Teens and college students flock to these markets, which can lead some to think that they are targeting younger users specifically. However, it’s more likely that younger users are more familiar with the tech, so it’s easier for them to participate.

Manipulation

Manipulation is another problem that needs to be addressed, especially when discussing low-liquidity assets that can be influenced directly from the prediction market. Also, these markets are subject to manipulation by whales, who could use the prediction markets as a way to distort the asset’s performance.

Bias

Another major issue is biased markets. The internet is filled with echo chambers, and depending on who is trading on a prediction market, the results could reflect that. Markets have been known to amplify biases, causing a shift in the public narrative.

Ethical Issues

There are also many ethical concerns. In many instances, these platforms deal with unsavory or sensitive topics like death, violence, political retribution, and other negative topics. Should people profit from these incidents?

What Platforms are Capitalizing on the New Popularity?

The prediction market is on the rise. However, there are two dominant players currently – Polymarket and Kalshi. Notably, these two platforms are believed to account for up to 99% of the total market value today.

Kalshi

Kalshi has seen explosive growth over the last year, with company documents registering a 1000% increase in volume in 2025. This growth placed the platform’s trading volume at $23.8B for 2025 alone. Even more impressive, the platform secured $291M in daily volume on the first day of this year, signalling strong demand.

Polymarket

Polymarket launched in 2020 in New York. Its founder, Shayne Coplan, noticed growing demand for decentralized prediction markets. He filled this demand with a simple, user-friendly yes/no prediction solution.

Polymarket helped to streamline prediction markets and introduce a new level of user support. The network’s friendly interface enables anyone to connect their wallet and start predicting in minutes.

Today, Polymarket is seen as a major signal source for the market, political elections, and much more. As such, they are often cited by institutional reports and are seen as one of the premier options driving adoption today.

Prediction Markets – A Perfect Balance

Today’s prediction market tightropes the line between gambling platforms and data providers. These protocols continue to expand their offerings and secure more institutional support. As such, the safe bet would be to predict that you will see many more of these markets emerge in the future.

Learn about other interesting investor news here.