Why is "smart money" entering prediction markets? An in-depth analysis of the trillion-dollar track in 2026

In the first quarter of 2024, the global prediction market trading volume was approximately $440 million, accounting for only a tiny fraction of the crypto derivatives market. By the first quarter of 2026, this number skyrocketed to $75 billion. In just two years, the prediction market has achieved an exponential leap.

This growth rate even surpasses the expansion pace seen during the early "liquidity mining" craze in DeFi — which went from about $300 million in 2019 to over $200 billion at its peak in 2021, taking roughly two and a half years — while the growth slope of prediction markets is even steeper.

In June 2026, data disclosed by a16z crypto showed that the weekly trading volume of prediction markets first reached $10.8 billion, setting a new record. The market is transforming from a "crypto niche experiment" into an emerging financial sector of systemic importance.

Faced with this historic opportunity, a phenomenon is attracting widespread attention: an increasing number of so-called "smart money" institutional investors and high-frequency traders are accelerating their entry into prediction markets. Why are they coming? The underlying logic deserves in-depth analysis.

Market Scale Explosion: From Marginal Track to Hundred-Billion Battlefield

To understand the flow of smart money, first, we need to see the true size of prediction markets.

According to data from Dune Analytics, in March 2026, the monthly user count of prediction markets increased by 118% year-over-year, reaching 865,411 users, with nominal trading volume approaching $23.89 billion, up about 1,107% from the same period last year. The total nominal trading volume across all tracked platforms in March reached $25.7 billion. Among them, Polymarket completed approximately 115M trades, contributing about $10 billion in trading volume.

More symbolically, traditional financial giants are making strong moves into the space. In March 2026, Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, invested $600 million in Polymarket. Polymarket and Kalshi are both reported to be in talks for new funding rounds at valuations around $20 billion. These signals clearly indicate that prediction markets are gaining recognition from mainstream finance.

Bernstein forecasts that the trading volume of prediction markets will reach about $240 billion by 2026, and approximately $1 trillion by 2030. This prediction implies a compound annual growth rate of about 80% by the end of this century.

The Triple-Drive Logic Behind Smart Money Influx

Drive 1: Sharp Increase in Macro Event Density

2026 coincides with the U.S. midterm election cycle, coupled with multiple geopolitical hotspots, directly boosting user participation willingness. Political prediction markets continue to contribute to platform trading volume, even surpassing the traditional dominance of sports predictions.

Meanwhile, traditional financial factors such as crypto price volatility and corporate earnings seasons are also incorporated into prediction scopes. The market type expands from elections to macroeconomics, technological events, pop culture, and more. The 2026 FIFA World Cup further expanded the market — Polymarket’s World Cup champion contract trading volume has exceeded $3 billion. Bernstein reports that the World Cup could bring up to $10 billion in consumer trading volume for sports betting and prediction markets.

The concentrated outbreak of diverse events provides ample trading targets and arbitrage opportunities for smart money.

Drive 2: Breakthroughs in Regulatory Frameworks

Regulation is a prerequisite for institutional capital entry. By the end of 2025, Polymarket acquired the CFTC-regulated derivatives exchange QCX, gaining a compliant channel to re-enter the U.S. market. This event sets a regulatory precedent, lowering the entry barriers for institutions and compliant capital.

In June 2026, the U.S. Commodity Futures Trading Commission (CFTC) released its first draft regulation for prediction markets, aiming to establish a standardized review mechanism to determine which event contracts align with public interest. The bipartisan digital asset legislation expected to pass in fall 2026 will further recognize on-chain prediction tools, tokenized assets, and stablecoin settlements.

As regulatory clarity improves, the pace of smart money entering will only accelerate.

Drive 3: Business Model Shift from "Subsidy Customer Acquisition" to "Revenue Self-Sustaining Loop"

On March 30, 2026, Polymarket ended its long-standing zero-fee model, imposing taker fees across core categories like crypto, sports, politics, and finance. Two days after the reform, the platform’s daily revenue surpassed $1 million. This transition signifies the completion of the prediction market’s business model cycle from "burning money for expansion" to "self-sustaining revenue."

A sustainable business model is a key dimension for smart money to evaluate the value of the track. When platforms no longer rely on external subsidies and develop self-sustaining capabilities, their long-term survival prospects significantly improve, attracting more strategic capital.

How Gate Can Engage Smart Money: From Integration to Insight

In March 2026, Gate officially integrated with Polymarket, the world’s largest decentralized prediction market, becoming the first centralized exchange to connect with this platform. This move allows over 51 million Gate users to participate in global hot event predictions with a single click.

Gate’s integration effectively addresses the long-standing participation barriers in prediction markets. Users do not need to manage seed phrases, cross-chain bridges, or pay gas fees; they can directly use USDT in their Gate spot accounts to trade predictions. Gate innovatively introduces a "Prediction Mode + Trading Mode" dual architecture: prediction mode is suitable for beginners to get started quickly, while trading mode offers order books, candlestick charts, market depth, and limit/market orders to meet professional traders’ strategic needs.

More critically, in May 2026, Gate added a "Smart Money Tracking" feature within prediction markets. This behavioral analysis system aims to identify traders who consistently perform well across multiple prediction events. Users can see the layouts of experienced and successful participants across various predictions — including capital flow patterns, trader confidence, and strategic positioning.

Gate evaluates traders based on multiple factors: long-term profitability stability, win rates across different event types, risk-adjusted performance stability, behavioral consistency, and capital allocation discipline. The upgraded leaderboard system introduces a multi-metric ranking model, categorizing traders as "Smart Money," "Whales," and "Sharks." This classification helps users better understand market structure and identify which participants are driving sentiment in specific events.

As of June 16, 2026, Gate’s prediction market trading volume exceeded $251 million, ranking first globally in nominal trading volume. On May 31, 2026, the daily trading volume in Gate’s prediction market was about $10k, ranking first among Polymarket channels and top three industry-wide.

These data indicate that Gate is becoming a key channel for smart money to participate in prediction markets.

The Hidden Costs of Scale Expansion: Risks Smart Money Must Face

Any high-growth track comes with structural costs. During rapid expansion, prediction markets reveal multiple risks.

Liquidity distribution is uneven. Leading markets have abundant liquidity, but long-tail prediction topics generally suffer from insufficient depth. When users build positions on less popular predictions, slippage costs can reach 10% or more. This uneven liquidity limits the effectiveness of prediction markets as "information aggregators."

Regulatory enforcement pressure on insider trading and market manipulation intensifies. By the end of Q1 2026, the CFTC designated prediction markets as one of its five priority enforcement areas, explicitly targeting insider trading, market manipulation, and wash trading. The Department of Justice has begun investigating several potential insider trading cases related to time-sensitive bets. In May 2026, a Google engineer was publicly prosecuted for insider trading in prediction markets.

Countermeasures from sports leagues and government agencies are also mounting. The NFL has formally asked Kalshi and Polymarket to cease offering contracts on events it considers "easily manipulable." Congress has proposed multiple bills to restrict government officials from using informational advantages in prediction trading.

For smart money, these risks mean that compliance costs and strategic adjustment costs are rising sharply. While pursuing profits, they must establish comprehensive risk assessment frameworks.

Summary

Prediction markets in 2026 have crossed from being a marginal track to becoming a mainstream financial infrastructure. In Q1 2024, global trading volume was only $440 million; by Q1 2026, it surged to $75 billion; and weekly trading volume in June 2026 first exceeded $10 billion. This growth is driven by the combined forces of increased macro event density, regulatory framework implementation, and mature business models.

Smart money is accelerating into this space. The entry of traditional financial institutions like ICE and Bernstein, the progress of Polymarket and Kalshi’s billion-dollar-plus valuations, and Gate’s prediction market exceeding $251 million in cumulative trading volume all sketch a clear picture of capital flow.

By integrating Polymarket, launching the "Smart Money Tracking" feature, and building a dual-mode trading architecture, Gate is lowering participation barriers, increasing market transparency, and providing smarter infrastructure for smart money.

However, risks such as uneven liquidity, regulatory enforcement escalation, and opposition from sports leagues cannot be ignored. The long-term value of prediction markets depends on their ability to balance expansion and regulation. For traders, understanding the flow of smart money is just the first step; establishing a systematic risk assessment framework is essential for sustainable participation.

FAQ

Q1: What is "smart money" in prediction markets?

"Smart money" refers to traders who consistently maintain high win rates and possess excellent risk management capabilities within prediction markets. Gate identifies such traders through multi-dimensional metrics (long-term profitability, win rate, risk-adjusted performance, etc.) and labels them as "Smart Money" on leaderboards.

Q2: How do prediction markets differ from traditional crypto trading?

Traditional crypto trading revolves around asset price fluctuations, while prediction markets focus on judgments about future event outcomes — from Federal Reserve rate cuts, sports results, to geopolitical developments. Prediction markets do not analyze candlestick charts; they focus on probabilities.

Q3: How can ordinary users participate in prediction markets?

Gate has integrated Polymarket, allowing users to directly use USDT in their Gate spot accounts to trade predictions, without separate registration, Web3 wallet setup, or gas fees. Gate offers "Prediction Mode" and "Trading Mode" interfaces, suitable for beginners and professional traders respectively.

Q4: How large is the prediction market?

In Q1 2026, the global prediction market trading volume reached $75 billion. In June 2026, weekly trading volume first exceeded $10 billion. Bernstein forecasts that the total trading volume for 2026 will be about $240 billion.

Q5: What are the risks of participating in prediction markets?

Main risks include: insufficient liquidity in less popular events leading to high slippage; increased enforcement from regulators like the CFTC targeting insider trading and manipulation; and opposition from sports leagues and government agencies. Participants should fully understand these risks and establish risk management frameworks.