Year in prediction markets: from regulatory ‘sinkhole’ to multibillion-dollar business

Prediction markets are about the hottest thing in crypto right now – and 2025 was the year they went mainstream.

These markets allow their users to bet on the future outcome of virtually anything – from crypto and stock prices to sporting, cultural and political events. There have even been markets over what color tie Fed Chairman Jerome Powell would wear.

Recently, the prediction markets have exploded to over $2 billion in weekly volumes on the major platforms: Polymarket, Kalshi, Limitless and Myriad. (Disclosure: Myriad is a product of Dastan, Declutter‘s parent company.) It was a dramatic surge for an industry that ended last year in limbo.

By the end of 2024, industry leaders Polymarket, Kalshi and other prediction sites had become a major part of the political discourse on election night. Polymarket in particular posted unprecedented volumes and visibility as the presidential race tightened. And it was one of the few platforms that accurately predicted President Donald Trump’s re-election.

Around the same time, crypto exchange Crypto.com launched a sports prediction market platform through its subsidiary, North American Derivatives Exchange. The company holds a designated contract market license through the CFTC, allowing it to list event contracts.

But there was a severe backlash. Even before the elections, Polymarket was dismissed as a mouthpiece for foreign money. France blocked Polymarket and the FBI raided the home of the company and CEO Shayne Coplan immediately after the election in an investigation whose scope remains unclear.

So it was a huge turnaround in February when the Commodities and Futures Trading Commission hosted a public roundtable to assess the prediction markets. Acting Chairwoman Caroline D. Pham, who was appointed the same day Trump was inaugurated, criticized the commission’s previous position, saying at the time that it had become a “sinkhole of legal uncertainty” that hampered innovation.

As regulatory hostility began to subside, the CFTC dropped its appeal of a court ruling that had cleared the way for Kalshi to offer event contracts on the U.S. election results. Just weeks later, popular trading app Robinhood partnered with Kalshi to launch March Madness prediction markets.

By the summer, a noisy Certuity report estimated that prediction markets could reach $95.5 billion by 2035, with a compound annual growth rate of 46.8%. Meanwhile, Polymarket spent $112 million on acquiring QCX, a CFTC-licensed exchange, in preparation for its return to the US market in November.

As prediction markets seeped further into the mainstream, they also began to appear far beyond the crypto-native platforms.

The cultural crossover became impossible to ignore when South Park devoted an episode to prediction markets, satirizing Americans’ growing obsession with gambling on everything from elections to everyday life.

The long-running animated series — often seen as a bellwether for when niche trends would truly hit the mainstream — portrayed prediction markets less as a fringe crypto curiosity and more as a ubiquitous and vaguely absurd part of modern culture.

In October, Trump Media & Technology Group announced it was launching a new prediction market product called Truth Predict in partnership with Crypto.com’s US derivatives division, allowing users on the Truth Social platform to bet on outcomes ranging from sports to elections and economic indicators. More recently, CNN, CNBC and Google signed distribution agreements with Kalshi. And the company signed a multi-year deal with the National Hockey League.

Polymarket has not rested on its laurels. It has signed a deal with TKO, making it the exclusive prediction market of UFC and Zuffa Boxing, and an exclusive media deal with Yahoo Finance. In October, the company announced that the parent company of the New York Stock Exchange, ICE, had invested $2 billion in a financing round that values ​​the platform at $9 billion.

Startups from the sector have also experienced impressive growth.

Limitless, an on-chain prediction market like Polymarket that runs on the Base network, raised $10 million in a token sale in October. Meanwhile, Myriad – which operates on multiple blockchain networks, including BNB Chain and Ethereum layer-two networks Abstract and Linea – recently reported 10x growth in trading volume in just three months. The platform also signed a distribution agreement with popular crypto wallet Trust Wallet to offer its prediction markets from within the app.

All the momentum has bigger players, like Robinhood, looking to expand beyond the Kalshi partnership. And both leaders, Kalshi and Polymarket, were in DC in October to advocate for their industries at an SEC-CFTC roundtable.

“The rise of Polymarket is astonishing, and with it is starting to grow an ecosystem around prediction markets that reminds me a lot of the early DeFi days,” said Claude Donzé, director of Greenfield Capital. Declutter. “Professional front ends, trading terminals and news aggregation systems such as Betmoar or Polymtrade, and even early experiments with outcome shares as collateral are being built.”

But it wasn’t all plain sailing. While the prediction markets claim compliance with federal regulations, states have pushed back against what they see as circumvention of their own state-level gambling rules.

Kalshi has borne the brunt of this, fighting battles in New York, Nevada and elsewhere. State support has not been sufficient to slow down new entrants. At the beginning of December, crypto exchange Gemini received the nod from the CFTC to offer prediction markets.

Traditional betting and gaming companies have also taken notice.

DraftKings and FanDuel, two of the biggest names in US sports betting, entered the prediction markets in 2025 as the industry’s trading volume soared to new highs. But analysts told it Declutter the companies may come too late to catch up with early leaders like Polymarket and Kalshi, which have already built a large user base and market depth.

Donzé added that all the hype surrounding prediction markets makes him certain that the industry is in the early days of a whole new layer of markets and applications, all being built around prediction markets.