Forecasting the current market situation

Compiling: Plain Language Blockchain

For over a thousand years, humans have been seeking ways to bet on the future using collective intelligence. The ancient Greeks cast special tokens into a tube system to vote; juries at the time expressed death sentences by choosing solid stones or perforated stones. In taverns (kapeleia) of that era, betting on the outside was certainly common.

In 17th-century Dubai’s securities exchanges, bets were placed on the arrival of ships; in 19th-century America, political betting sites dominated election forecasts until they were banned in the 1940s. There were also commodity futures on the Chicago Mercantile Exchange. From this, we understand that predictive betting with capital input can generate powerful informational signals.

Today’s crypto-driven prediction markets are a rebirth of this ancient digital practice—but with a key difference: they are permissionless, transparent, and global.

Information Market Revolution: How Crypto Prediction Markets Differ

Traditional prediction markets require trusted intermediaries to hold bets, verify outcomes, and pay out winnings. Cryptography and blockchain technology eliminate these middlemen. When you place an order on Polymarket regarding geopolitical, macroeconomic, or cultural markets (such as “Will the Federal Reserve cut interest rates in January?” or “Who will win Best Picture at the 2026 Oscars?”), your principal is locked in a smart contract, the outcome verification process is transparent, and settlement is done automatically using USDC. No bank accounts needed, no regional restrictions, and no middlemen taking a cut or controlling access.

Another platform, Kalshi, focuses 90% of its topics on sports; while emerging platforms like Novig are entirely dedicated to sporting events.

Convergence Moment: Why Now?

Prediction markets’ seven-day trading volume has reached $3.9 billion, driven by factors such as regulatory maturation, integration with traditional finance (TradFi), and infrastructure breakthroughs.

Regulatory-wise, the most notable development is CFTC approval enabling domestic operations in the U.S.. For example, in July 2025, Polymarket acquired derivatives trading platform QCX, LLC, and clearinghouse QC Clearing LLC, both licensed by the CFTC. This allows traders to operate with greater confidence on Polymarket. Kalshi raised $1 billion at a $11 billion valuation in December, demonstrating institutional confidence. Overall, regulatory clarity is unlocking institutional capital and retail access through established players.

With a $2 billion investment from Intercontinental Exchange (ICE) into Polymarket, ICE has become a global distributor of Polymarket’s event-driven data, deepening the integration between traditional finance and prediction markets.

Partnerships further deepen this integration. Polymarket’s long-term collaboration with TKO Group Holdings makes it the official exclusive partner of UFC and Zuffa Boxing. This directly merges prediction market tech with live fan experiences.

Kalshi is partnering with CNN and CNBC, so that by 2026, viewers will see real-time probabilities in news tickers. Both Polymarket and Kalshi have agreements with Google. Companies entering this space through partnerships or indirect applications include Robinhood, Fanatics, and Coinbase. By November 2025, Robinhood’s prediction market event contracts traded 30 million units (up 20% month-over-month), showcasing retail-scale promotion.

Technological advances have brought infrastructure breakthroughs, including: multi-chain expansion (Polygon, Solana, Base, Gnosis Chain); AI-powered prediction integration for instant permissionless settlement; and hybrid AMM/order book models that improve liquidity while reducing difficulty. This contrasts with early Augur, which launched before technology and regulation matured.

Market Landscape: Leaders and Challengers

While Polymarket remains dominant, it faces challenges from competitors. In fact, the number of organizations applying for or becoming designated contract markets (DCMs) increased by 500% in 2025. More companies also seek to partner with futures commission merchants (FCMs) as DCMs.

Comparison of Polymarket and Opinion (based on 30-day data as of December 3, 2025):

• Polymarket:

  • Open Interest: $247.1 million
  • Total Nominal Trading Volume: $4.39 billion
  • Hot category TVL (Total Locked Value) accounts for 82% of market share
  • Zero historical fee model drives user growth

• Opinion:

  • TVL surged 110% over 30 days (from $30 million to $63 million)
  • Monthly trading volume in stocks: $4 billion, showing potential for innovative market sharing
  • Demonstrates high product-market fit (PMF) on emerging Layer 2 infrastructure

Network effects and “winner-takes-all” dynamics are attracting growth capital, as these platforms offer scalable confidence options beyond traditional derivatives and betting products. Revenue strategies are expanding beyond fees, including: data licensing (providing real-time probabilities to news outlets and financial terminals), API integrations, and cross-platform financial services cross-selling (e.g., Robinhood).

Behavioral Shifts

Traders are migrating toward prediction markets, which present re-constructive speculative opportunities. The market awaits DeFi composable hedging tools and alpha sources. As real-time probabilities in political and economic forecasts align with traditional polls, this migration will lead to more event markets.

Despite political forecasts drawing attention, Polymarket’s open interest (unsettled contracts) is broadly distributed:

• Non-political elections: $55 million
• Cryptocurrency: $52 million
• Business: $36 million
• Elections: $22 million
• Pop culture: $20 million
• Sports: $20 million

New entrants include entertainment prediction markets launched through Crypto.com and Hollywood.com collaborations, and short-term markets focused on crypto and stock prices supported by Coinbase and others, called Infinite.

Controversies, Challenges, and Emerging Solutions

Prediction markets still face pain points, including centralization risks, manual reporting in traditional prediction machine models, and settlement delays.

Regulatory gray areas persist, such as classification disputes over sports betting. For example, in November 2025, a Nevada judge ruled Kalshi as a gambling platform, not compliant with state gambling laws. Kalshi insists it is a federally regulated financial trading platform. Similar disputes are ongoing in Massachusetts.

Regardless of outcomes, real-name verification (age gates) and reinvigorated betting remain issues to be addressed.

Market risks include: the influence of whales on low-liquidity markets, self-trading (wash trading) in decentralized environments, and balancing unauthorized trading with market integrity.

The market landscape is evolving, including: perpetual prediction markets for continuous outcomes, composite markets for complex multi-indicator events, and bonding curve mechanisms for dynamic liquidity. Probabilities from prediction markets serve as indicators for DeFi protocols, and tokenized positions enable secondary market leverage—full of opportunities.

Perspective

From our view, several catalysts could drive large-scale adoption in the short term: CFTC-approved platforms launched by established commodity firms, social platform integrations (such as embedded prediction APIs in tweets), and embedded markets in new neobanks that combine finance and speculation.

Furthermore, as prediction markets evolve into a distinct financial asset class, we will see vertical specialization (e.g., dedicated platforms for sports or business). Platforms like Novig focusing on sports will offer better user experiences than general-purpose ones.

In the next 1 to 3 years, privacy-preserving prediction markets utilizing Zero-Knowledge Proofs (ZK-proofs) may emerge, and result-based governance applications like Futarchy could develop.

Future obstacles include strict regulatory restrictions on global access, user fatigue if prediction accuracy cannot improve, and competition from traditional platforms adopting blockchain technology.

Societal impact: As integration deepens, prediction markets will enable collective resource allocation and decision-making, decentralized public infrastructure forecasting, and a shift in media/governance from “polls” to “participatory probability markets.”

The question is no longer whether prediction markets will scale, but how many prediction markets we will have and which models can capture the trillion-dollar opportunities in on-chain pricing of real-world uncertainties.

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