Will prediction markets become a financial infrastructure? An in-depth analysis for 2026

For a long time, prediction markets have been labeled as “academic experiments,” “public opinion tools during election seasons,” or even “derivatives of sports betting.” They seem to always cling to a high-profile scenario, yet are rarely truly understood as financial infrastructure.

But 2026 data is rewriting this narrative.

From the precise prediction of the 2024 U.S. presidential election, to the 2026 FIFA World Cup’s first-week sports trading volume exceeding 71.8 million US dollars, and to top platforms whose valuations have both surpassed 1 billion US dollars. Prediction markets are undergoing a transformation similar to the early stage of options markets—“specialization, institutionalization, and infrastructure-building.” They are evolving from an edge-of-the-market event trading tool into a financial infrastructure that prices real-world uncertainty.

Exponential leap in market size

For any financial infrastructure to emerge, the prerequisite is that the market is large enough and the growth curve is steep enough. Prediction markets satisfy both conditions at the same time.

Looking back at 2024, the total trading volume across the entire track was only 15.8 billion US dollars. By 2025, this figure had surged to 63.5 billion US dollars, about a 4x year-over-year increase. Entering 2026, the growth momentum became even more intense: in Q1, global prediction market trading volume jumped to 75 billion US dollars, while the same period in 2024 was only 440 million US dollars. In just two years, an exponential leap was achieved.

On a monthly basis, in January 2026, the industry’s monthly trading volume exceeded 21 billion US dollars, more than 170 times higher than the same period in 2025. In May, monthly trading volume reached 29.4 billion US dollars; in the first week of June, an additional 6 billion US dollars was added—whereas 12 months earlier, monthly trading volume was still just 1.2 billion US dollars. More notably, in June 2026, data disclosed by a16z crypto showed that prediction markets’ weekly trading volume first reached 10.8 billion US dollars, setting a new all-time high.

Analysts at investment bank Bernstein estimate that total transaction volume in 2026 will reach 240 billion US dollars, a 370% increase over 2025. What draws particular attention from institutional investors is the long-term outlook: assuming an approximate compound annual growth rate of 80% from 2025 to 2030, by 2030 the annual trading volume of prediction markets could exceed 1 trillion US dollars.

This kind of growth curve is an uncommon scale in the financial industry. For an emerging track still in its early stage, these numbers are enough to show that the market is betting on a brand-new financial infrastructure that is about to explode.

From an election tool to all-scenario coverage

The reason prediction markets can become financial infrastructure is that their application scenarios have far exceeded their original use in election predictions.

During the 2024 U.S. presidential election, Polymarket users precisely predicted Trump’s victory one month in advance, bringing the platform into the public spotlight. According to academic research, Polymarket performed better than traditional polls in predicting the 2024 election, with a clear advantage especially in swing states.

But what truly changed the industry’s narrative after the election was that trading volume did not disappear once the election ended. Sports markets absorbed the traffic. By the end of 2025, sports markets accounted for 85% of Kalshi trading volume; technology and science categories grew 1,637% year over year, while economics categories grew 905% year over year. Entertainment, crypto, politics, and culture are showing stronger user growth and better trading retention structures.

The hosting of the 2026 FIFA World Cup further boosted market scale. Polymarket’s World Cup champion contract trading volume surpassed 3 billion US dollars. In the first week of the World Cup, the nominal trading volume of prediction markets in sports reached 7.18 billion US dollars, setting a new record high.

A report recently released by the Korean venture capital firm Hashed pointed out that prediction markets are evolving from simple betting platforms into “next-generation information infrastructure” capable of aggregating collective wisdom, with even potential applications in evaluating AI’s predictive capabilities. In 2026, prediction markets are no longer defined as “gambling” or “derivatives”; they are being redefined as a decentralized information aggregation and pricing system.

Accelerating institutional capital influx

If prediction markets in the past were more like a retail game, then the most notable change in 2026 is that institutional capital is accelerating into the space.

In March 2026, Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, completed a 600 million US dollar investment in Polymarket. Polymarket and Kalshi—two major platforms—were both reportedly exposed as being in negotiations for a new round of fundraising at valuations around 20 billion US dollars. Specifically, after the new round of financing, Kalshi’s valuation rose to 22 billion US dollars, doubling from the 11 billion US dollars valuation in December 2025; Polymarket’s valuation is believed to have risen to 15 billion US dollars.

These signals clearly indicate that prediction markets are being recognized by the mainstream financial system.

The core driver for institutional investors entering prediction markets is the arbitrage space created by pricing efficiency gaps. Specific strategies include cross-platform arbitrage (exploiting pricing discrepancies for the same event across different prediction markets), market microstructure arbitrage (leveraging differences in liquidity distribution and matching mechanisms), and news-driven trading (using information processing speed advantages to complete pricing adjustments at the first moment when an event occurs).

At the same time, quantitative firms such as DRW, Wintermute, IMC, and others have begun to allocate capital into prediction markets. Platforms such as Kalshi are actively courting top institutional investors and hedge funds. As reported by Reuters, many hedge funds and institutional investors are closely watching trading opportunities in prediction markets.

From retail speculation to institutional participation, the financial attributes of prediction markets are being fully strengthened.

Breakthrough in compliance and regulatory frameworks

Financial infrastructure cannot remain outside regulation for the long term. In 2026, the regulatory framework for prediction markets achieved a historic breakthrough.

At the end of 2025, Polymarket, through the acquisition of QCX, a derivatives trading exchange regulated by the CFTC, obtained a compliance pathway to re-enter the U.S. market. The significance of this event goes beyond a single platform—it provides a precedent reference for the whole track’s regulatory acceptability, lowering the entry threshold for institutional and compliant capital.

On June 10, 2026, the U.S. Commodity Futures Trading Commission (CFTC) released a 267-page proposed rule, planning major adjustments to the way event contracts are reviewed. This framework establishes a 90-day review process for specific event contracts submitted by registered exchanges. The CFTC also issued its first draft regulatory ordinance targeting prediction markets, aiming to establish a standardized review mechanism to determine which event contracts serve the public interest.

Meanwhile, the CFTC’s enforcement division has listed prediction markets as one of its top five priority enforcement areas, explicitly focusing on cracking down on insider trading, market manipulation, and wash trading. In Q1 2026, the CFTC had already issued an enforcement framework against insider trading in prediction markets, setting operating rules for the market.

The bipartisan digital asset legislation expected to pass in the fall of 2026 will further recognize on-chain prediction tools, tokenized assets, and stablecoin settlement. As the regulatory framework becomes clearer, the pace of institutional capital entering prediction markets will only accelerate further.

A self-sustaining business model loop

On March 30, 2026, Polymarket ended its long-standing zero-fee model and began charging transaction fees across core categories such as crypto, sports, politics, and finance. The fee structure uses a variable model: the peak fee rate for crypto reaches up to 1.8%, and the actual fees are adjusted dynamically based on market prices. Two days after the reform was implemented, the platform’s daily revenue exceeded 1 million US dollars.

This transformation means prediction markets have completed a business model closed loop—from “burning money for expansion” to “self-sustaining.” It provides a financial foundation for the platform’s sustainable development. When a track can generate continuous revenue relying on its own trading activities, it no longer needs external capital injections to keep operating—that is one of the basic characteristics of financial infrastructure.

The hidden cost of scaling up

Any fast-growing track comes with structural costs. As prediction markets expanded rapidly, they also exposed multiple risks.

First risk: the “fat-tail” distribution problem of liquidity. The liquidity in leading markets is extremely abundant, but long-tail prediction themes generally suffer from insufficient depth. When users build positions on non-hot prediction events, slippage costs may be as high as 10% or even higher. This uneven liquidity distribution limits the effectiveness of prediction markets as an “information aggregator”—only price signals from high-attention events have reference value, while long-tail predictions lose pricing efficiency due to lack of liquidity.

Second risk: insider trading and market manipulation. By the end of May 2026, U.S. authorities had filed an insider trading lawsuit against a Google engineer. The Department of Justice has also begun investigating multiple potential insider trading cases related to time-sensitive betting behavior. Regulators have shifted from “observation” to “action,” and industry compliance costs are rising sharply.

Third risk: pressure from sports leagues and government institutions. The NFL has officially requested Kalshi and Polymarket to stop offering event contracts it deems “easy to manipulate.” Congress has introduced multiple bills aimed at limiting government officials from using information advantages to participate in prediction trading. At the end of April 2026, Brazil’s National Monetary Council issued Resolution No. 5,298, banning derivatives contracts with non-economic events as the underlying—shutting down about 27 to 28 prediction platforms in one move.

Prediction markets are facing multiple pressures from content copyright holders, policymakers, and overseas regulators.

Conclusion

Can prediction markets become financial infrastructure? The answer is becoming increasingly clear.

In terms of market size, the 75 billion US dollars trading volume in Q1 2026, the 240 billion US dollars expected for the full year, and the potential 1 trillion US dollars scale by 2030 have already given prediction markets the volume required of financial infrastructure.

In terms of application scenarios, prediction markets have expanded from election betting to multiple dimensions including sports, technology, economics, entertainment, and crypto, covering every aspect of real-world uncertainty.

In terms of participant structure, traditional financial forces such as Intercontinental Exchange, hedge funds, and quantitative firms are accelerating their entry, and the institutionalization trend is irreversible.

In terms of regulatory frameworks, the CFTC has issued draft regulations and enforcement frameworks for prediction markets, and the compliance process is accelerating.

In terms of business model, leading platforms have completed the transition from a zero-fee model to a fee-based model, completing a self-sustaining business model loop.

Of course, for prediction markets to truly become financial infrastructure on par with stocks, bonds, and derivatives, they still need to solve structural issues such as uneven liquidity distribution, insider trading risks, and cross-border regulatory coordination.

But the direction is clear. Prediction markets are evolving from an edge-of-the-market event trading tool into a new type of financial infrastructure that prices uncertainty in the real world.

FAQ

Q1: What is the difference between prediction markets and traditional futures and options markets?

Prediction markets deal with real-world events (such as election results, sports matches, economic data, etc.), not traditional commodities or financial assets. The prices in prediction markets directly reflect the market’s collective judgment of the probability of an event, and they have the function of information aggregation. Traditional derivatives markets mainly serve risk hedging and price discovery, with the underlying typically being tradable financial assets or physical commodities.

Q2: Are prediction market prices really more accurate than polls?

Academic research indicates that prediction markets have a unique advantage in aggregating dispersed information. Taking the 2024 U.S. presidential election as an example, Polymarket showed accuracy superior to traditional polls in predicting swing state outcomes. This is because prediction markets require participants to express their views with real money, and the incentive mechanism encourages those with informational advantages to participate in pricing, resulting in more effective price signals.

Q3: What is the biggest risk facing prediction markets?

The biggest current risks come from three areas: first, insider trading—people with non-public information can profit before the event outcome is known; second, uneven liquidity distribution—insufficient depth for non-mainstream events leads to low pricing efficiency; third, regulatory uncertainty—different countries classify prediction markets differently, and some countries view them as gambling and ban them outright.

Q4: How can ordinary users participate in trading on prediction markets?

Users can participate through the Gate platform. Gate is the world’s first centralized exchange integrated with Polymarket. In the Gate App, users can enter the Polymarket page directly from the Alpha section on the platform’s homepage, and use USDT in their accounts to predict events. This integration greatly lowers the barrier for ordinary users to enter prediction markets, making on-chain operations that previously required connecting a wallet and managing private keys as convenient as spot trading.

Q5: What does the long-term outlook for prediction markets look like?

Bernstein predicts that by 2030, prediction markets’ annual trading volume could exceed 1 trillion US dollars. The drivers include: continuous growth in the density of macro events, gradual improvement of compliance frameworks, accelerated entry of institutional capital, and increased demand in the AI era for high-quality information pricing tools. Prediction markets are evolving from “event trading tools” into both “information infrastructure” and “financial infrastructure.”