This article is featured in the Q4 2025 Future Strategist newsletter, you can read the rest of the newsletter here.
Prediction markets have rapidly gained prominence in 2025, generating around $40 billion in global trading volume and beginning to reshape how the world processes information and makes decisions. At their core, prediction markets aggregate the beliefs of large groups of individuals who are incentivised to be right, turning these contracts into real-time forecasts of future events that are often more accurate than traditional polls.
Underpinned by CFTC (Commodities Future Trading Commission) regulated derivative ‘event contracts’, prediction markets let participants trade on binary outcomes across a vast array of interests such as finance, sports, politics and media. What makes prediction markets powerful? It is information density, real-time signals and simplicity. In a world overloaded with narratives, prediction markets cut through the noise with one simple output: price.
Why are prediction markets taking off?
Why are prediction market platforms such as Kalshi and Polymarket suddenly taking off? This can be attributed to three key forces converging: Regulatory clarity, Distribution unlock and Sports.
1. Regulatory clarity
For years, prediction markets had operated in a legal grey zone area just like crypto; the turning point, however, came in 2024 when a US federal court allowed Kalshi to offer ‘event contracts’. These contracts were financial swaps subject to CFTC regulation, not gambling products subject to state regulation, and reshaped the entire landscape. The impact has been profound, with Kalshi successfully defending political contracts in court, while Polymarket re-entered the US market.
2. Distribution unlock
Distribution unlock has also been a key accelerant for prediction markets. Today, mainstream apps such as Robinhood, Coinbase and FanDuel have removed friction in unlocking demand. In December 2025 alone, Kalshi and Polymarket processed roughly $11.4 billion in notional volume, up double digits month-over-month, with weekly records driven largely by sports contracts. While for Robinhood, prediction markets have become its fastest-growing product line by revenue just a year after launch, with over 9 billion contracts traded by more than 1 million customers. Industry projections now forecast that prediction markets will reach $100 billion within the decade, with annual growth rates approaching 47% – the market is only just getting started.
Kalshi and Polymarket daily notional volume ($m)
Source: Piper Sandler, January 2026.
3. Sports
Third, sports are providing a major on-ramp for prediction markets through high-frequency and habit-forming trading behaviour. This can be visible in December’s numbers, where the average volume per NCAA American football game rose 367% month-over-month, even as the number of games declined.
Onchain rails
Prediction markets have become a positive catalyst for blockchain adoption. Polymarket operates natively on Polygon (a Layer 2 Ethereum blockchain), settling trades in USD Coin (USDC), while Kalshi has steadily been expanding its onchain connectivity through integrations, including Solana via Jupiter and DFlow. These moves have strengthened support for major blockchain networks and unlocked fresh liquidity for prediction markets.
We have also seen Coinbase recently leaning in too. It has now partnered with Kalshi to launch prediction markets on its own platform and entered an agreement to acquire The Clearing Company, a prediction market clearing firm, helping Coinbase to gain both operational expertise and the technical capability to scale prediction markets for institutional participants. This hybrid model of a regulated core and onchain liquidity rails signals where the industry is heading – regulated markets with crypto native interoperability.
Funding supercycle: printing billionaires
The rate of capital invested into prediction market platforms in 2025 was impressive, contributing to the emergence of a new cohort of billionaires under 30. Kalshi and
Polymarket, the two leading platforms, completed a number of funding rounds. Kalshi raised $185 million in the summer, followed by $300 million at a $5 billion valuation in October. Less than two months later, it secured another $1 billion at an $11 billion valuation, propelling both co-founders into the ‘three-comma club’.
Polymarket made headlines in October when the New York Stock Exchange's parent company Intercontinental Exchange (ICE) announced a strategic investment of up to $2 billion at an $8 billion valuation in the Polymarket platform, also turning its 27-year-old founder and CEO into a billionaire.
Risks and outlook
As with many other markets, structural risks still exist. These include the potential manipulation of low-liquidity events, conflicts of interest around contracts, and the blurred line between prediction forecasting and gambling. Recently, during Coinbase’s third-quarter earnings call, CEO and co-founder Brian Armstrong had some spontaneous fun after learning that prediction markets were offering contracts on the specific words he might use on the call. He proceeded to rattle off a handful of crypto-related buzzwords to ensure they made it in the call.
There are also concerns about how material non-public information could be exploited on these platforms. For example, in October, there was a surge in contracts for Venezuelan opposition leader María Corina Machado to win the Nobel Peace Prize just hours before she was officially announced as the winner.
Prediction markets are helping to bring the world onchain. In the years ahead, we could see these markets become key data products, integral to risk modelling, macroeconomic forecasting and political polling. The data generated by these markets is becoming a valuable commodity in their own right. For those who can interpret the data, prediction markets are providing a new signal – what is priced into Polymarket and Kalshi today, may well shape how we make decisions tomorrow.
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Pieran Maru
Pieran Maru is a Fund Manager in the Global Equities team. Pieran joined Liontrust in 2024 from GAM where he covered software and hardware companies in GAM’s Global Equity team.
