Prediction markets are expected to gain significant traction in 2026, anticipating billions in trading volume and an expanding base of users. Originally dominated by election predictions, these markets have diversified to include sports, cryptocurrency, macroeconomic events, technology, and pop culture as key drivers of activity.
A Pew Research Center analysis based on data from The Block indicates that platforms like Polymarket and Kalshi saw their trading volume surge from under $5 billion in September 2025 to close to $24 billion by April 2026. This trading figure is double the average monthly turnover of $14 billion recorded among legal sportsbooks in the U.S. While sports, politics, and cryptocurrency are popular trading areas, their volume distributions vary by platform: sports represent 80% of Kalshi's trading volume, but only 39% for Polymarket, where cryptocurrency and politics combine for 52% of total volume.
What are prediction markets? They are platforms where contracts can be traded based on the outcomes of future events. The value of these contracts reflects market participants’ perspectives on the likelihood of an event happening. For instance, a market price of $0.78 signifies a 78% perceived probability of the event occurring, offering a payout of $1 if the event takes place, while the stake is lost if it does not.
Currently, Polymarket is a leading platform in this space, allowing mobile trading through crypto wallets, and it recently recorded a daily transaction volume of $425 million.
The classification of prediction markets as gambling remains a contentious issue; in the U.S., they fall under CFTC regulation and are classified as financial markets providing “event contracts.” However, many states view sports betting on these platforms as akin to gambling, with legal challenges already appearing. New York and Wisconsin have taken steps to assert that prediction markets contravene state laws. Meanwhile, international regulators have also begun to scrutinize these platforms. In South Korea, authorities are investigating Polymarket users in relation to illegal gambling claims. In the Netherlands, Polymarket faced a €420,000 fine for mishandling its exit from the market, hinting at a potential trend toward stricter regulations across Europe.
As of January 2026, prediction markets are experiencing robust growth. The trading volume reached $5.4 billion in the first week of January, escalating to $6.5 billion by April, with projections suggesting that volumes could quintuple from 2025 to around $25 billion weekly across all platforms.
Initially conceived as election forecasting tools, prediction markets are becoming known for their accuracy, boasting a Brier probability score of about 0.09, which positions them as superior forecasting instruments compared to polls and expert predictions. Their credibility is further reinforced by their increasing popularity within business, politics, finance, and media.
Kalshi has seen its market valuation double from $11 billion in late 2025 to $22 billion after securing $1 billion in funding by March 2026. Polymarket's valuation also rose from $9 billion to $15 billion within the same period. This growth indicates that prediction markets are likely to continue trending upward rather than being a fleeting interest.
Interest in prediction markets is rising for several key reasons. While some traders have raised concerns about how disputes, like those arising from a lawsuit against Polymarket over a Bitcoin market settlement, are handled, the platforms remain popular in both political and sports contexts. The intersection of prediction markets with gambling and finance presents various business opportunities, yet it also raises questions regarding regulation, ethics, and user trust.
Looking ahead to 2026, prediction markets are evolving from niche cryptocurrency applications into a robust financial ecosystem that could handle over $20 billion monthly in trading volume. As more precise regulations come into play, institutional investments are likely to surge. With the rise of advanced platforms aimed at institutional investors and the influence of AI on market dynamics, the potential for growth is significant.
Institutional cash flow could reshape the landscape; Kalshi has seen its annual revenues triple since last November to nearly $2 billion. Wall Street experts predict that prediction market volume might increase to $1 trillion by 2030, well up from last year’s $51 billion to an expected $240 billion by the end of 2026.
AI is poised to play a pivotal role too, with Kalshi employing AI to fine-tune market operations while Meta develops an app, dubbed “Arena,” aimed at using its Llama model to identify trends and establish markets.
Major companies have shifted from passive observation to active participation, with Meta reportedly working on an app aimed at competing directly with Kalshi and Polymarket using in-game currency to sidestep certain legal aspects.
Sports have overtaken politics as the central focus for trading volume; nearly 87% of Kalshi's $11.39 billion in trading for March came from sports events. Similarly, Polymarket's involvement in World Cup markets significantly spiked trading activity.
There are signs of increasing clarity in regulation, as Kalshi seeks to challenge New York’s regulators on sports-related contracts, a request the court denied. The situation remains complex, with Polymarket navigating ongoing litigation over gambling laws in various states while enjoying recent approvals that facilitate growth. Internationally, regulatory environments appear equally mixed, with emerging categories in technology and science drawing interest and rapid development in cultural markets.
