In 2025, prediction markets have surged to unprecedented heights, with global trading volumes reaching $44 billion amid regulatory advancements and mainstream adoption. These platforms, where participants trade contracts on future events to aggregate collective wisdom, trace their roots to ancient forecasting practices but now stand on the cusp of transforming into a trillion-dollar industry by the decade’s end, driven by blockchain integration and institutional interest.
Proponents say the mechanism can aggregate information faster than traditional surveys because traders put money at risk; critics argue the product often resembles gambling, especially in sports. Beyond these debates, it probably won’t be an overestimate to say that prediction markets aren’t just forecasting events, instead, they’re challenging us to question how we discern truth in a post-truth era, tapping into human nature’s innate desire to make sense of chaos.
Historical Background (Pre-Blockchain Era)
In one form or another, prediction markets have been around since ancient times. In ancient Greece and Rome, oracles such as the Oracle of Delphi interpreted omens for political and military decisions, serving as early — and often institutionalized — forecasting systems.
Similar forecasting traditions emerged elsewhere, though they were not “markets” in the modern sense. In China, the I Ching (Yijing, or “Book of Changes”) offered a structured divination system where questioners generated a hexagram (often via yarrow stalks or coin casts) and interpreted it as guidance for decision-making under uncertainty. In Babylon, scholars tracked celestial movements (planets, stars, eclipses) to advise rulers on matters ranging from wars to harvests. And in Mesoamerica, the Maya maintained sophisticated calendrical frameworks used to identify “auspicious” or “dangerous” periods and align ceremonies, governance, and agriculture with cyclical time.
By the 16th century, parts of Europe, most notably Italy, where political wagering is well documented in Rome around papal conclaves and Venice, saw informal bets on high-stakes outcomes that effectively converted collective expectations into odds backed by money — a conceptual precursor to modern prediction markets.
In the 20th century, US political betting pools, tracked in financial papers, often outperformed polls. One widely cited benchmark of performance is the Iowa Electronic Markets (IEM), which research has compared against traditional polling. A peer-reviewed analysis of IEM election markets found market forecasts were closer to eventual outcomes than contemporaneous polls a majority of the time across multiple U.S. presidential cycles.
Commercial platforms, however, repeatedly ran into U.S. regulatory limits. Intrade, an Ireland-based prediction venue, shut off U.S. access шт 2012 amid “legal and regulatory pressures” after action by the CFTC, ultimately closing up shop the following year. PredictIt, which operated for years under a CFTC no-action position, faced a major disruption after the agency slapped it with a shutdown order in 2022, before winning its lawsuit against the CFTC in July 2025.
These centralized platforms advanced the concept of prediction markets but highlighted vulnerabilities to legal and operational challenges.
Emergence of Blockchain-Based Prediction Markets
Blockchain integration began around 2014–2017, leveraging smart contracts for automated, decentralized operations. Augur, after a period of lengthy beta testing, was one of the first to go live in 2018 with a native REP token for oracle reporting. The project, however, struggled with high Ethereum gas fees, unreliable nodes, and poor UX, requiring users to run full nodes. Version 2 launched in July 2020, improving speed and features.
While Augur pioneered the concept of decentralized oracle systems that let anyone ask and resolve questions about the future without trusted intermediaries, it faced its share of challenges including scams and low adoption compared to centralized rivals like Polymarket, Currently, Augur is in a “reboot” phase — an ongoing revival effort launched in 2025 by the Lituus Foundation to modernize the platform for today’s crypto landscape. The initiative focuses on rebuilding infrastructure, enhancing oracle security, and improving usability after years of dormancy.
Gnosis, which initially mirrored Augur’s prediction-market vision, launched in 2015 and ran a successful ICO in April 2017, raking in $12.5 million in ETH. It powered projects like Omen, a fully decentralized, multichain prediction market, but later shifted away from consumer-facing markets amid clunky UX, funding constraints, and regulatory uncertainty.
Over time, recognizing stronger demand for Ethereum infrastructure, the Gnosis team built a suite of tools, including Safe, a multisig wallet that now supports more than 20 networks; CoW Protocol, an open-source, permissionless DEX aggregation protocol; and the Conditional Tokens Framework, which enables tradable event outcomes.
GnosisDAO was formed in 2020 for governance, emphasizing payments and oracles, positioning Gnosis as a backend enabler for modern platforms like Polymarket.
Several other decentralized prediction markets have appeared alongside Augur and Gnosis, leveraging blockchain for trustless event forecasting. One notable example is Zeitgeist, a Substrate-based protocol designed for cross-chain scalability and secure markets. Built as an app-chain in the Polkadot/Kusama ecosystem, Zeitgeist lets users create markets and trade outcome tokens on-chain, with the ZTG token anchoring network incentives and governance.
It also experiments with futarchy — a governance model popularized by economist Robin Hanson that “votes on values, but bets on beliefs,” using prediction markets to select the policies most likely to improve a chosen metric — and includes a dedicated futarchy module in its stack. When outcomes are disputed, Zeitgeist’s “decentralized court” provides a last-resort resolution path where ZTG holders can stake into the dispute process.
Current state of prediction markets
By 2025, prediction markets have moved from a niche corner of fintech into a recognizable category of “event-driven finance,” with liquidity deepening and distribution shifting from standalone sites to mainstream brokerage and consumer apps. A useful indicator of that maturation is sheer activity: one industry survey estimated more than $27.9 billion in trading volume across prediction-market platforms from January through October 2025 measured by contracts traded, with weekly volume reaching an all-time high of roughly $2.3 billion in the week of October 20, 2025.
At the same time, other tallies that aggregate a different set of venues and definitions put full-year 2025 volume higher — one widely circulated estimate places it around $44 billion — underscoring that “volume” comparisons can vary materially depending on methodology.
A bifurcated market: regulated “event contracts” vs. crypto-native venues
The landscape is increasingly split between CFTC-regulated event-contract distribution in the U.S. and crypto-native prediction markets that rely on on-chain settlement and oracle frameworks. On the regulated side, Kalshi has continued to position itself as the segment’s flagship U.S. venue — first by scaling after its earlier regulatory foothold, then by raising capital to expand distribution, with the firm’s current valuation standing at $11 billion. One of the key elements of the company’s ambitious plans for the coming year is integrating the platform across all major blockchain applications and exchanges.
In parallel, the pipes bringing prediction markets to mass users expanded, with Robinhood announcing a dedicated prediction markets hub inside its app in March 2025, and later deepening the firm’s investment in the segment through the introduction of a futures and derivatives exchange and clearinghouse
On the crypto side, Polymarket remained the most visible consumer brand, benefiting from low-fee execution and a familiar trading interface while using crypto rails for settlement. Its oracle stack is tightly linked to UMA’s Optimistic Oracle, while Gnosis’s framework on Polygon is used for low fees and hybrid order books.
The sector’s biggest institutional signal came in October 2025, when Intercontinental Exchange (ICE), owner of the NYSE, announced a strategic investment of up to $2 billion in Polymarket at an implied valuation of roughly $8 billion. Before that, Polymarket also announced it had acquired QCEX,a CFTC-licensed exchange and clearinghouse, in a deal valued at $112 million—a move framed as “laying the foundation to bring Polymarket home — re-entering the US as a fully regulated and compliant platform.”
Polymarket’s daily volume hit a 2025 record of $188.6 million on December 20, rivaling peaks during the 2024 U.S. election.
Prediction Markets Go Mass, Hit the Guardrails
The final two months of 2025 were defined less by breakthroughs in oracle design than by a fast-moving mix of distribution deals and regulatory pushback. As investor interest surged, Kalshi and Crypto.com helped launch a national coalition of prediction-market operators — an initiative effort that also included Coinbase and Robinhood — aimed at coordinating industry messaging as scrutiny intensified. At the same time, Coinbase moved deeper into event contracts, announcing in mid-December that it would roll out prediction markets inside its main app through a partnership with Kalshi, followed by a deal for prediction-markets startup The Clearing Company.
Traditional sportsbooks and exchange infrastructure also pressed into the the prediction markets segment: FanDuel and CME Group launched “FanDuel Predicts” in five states with ambitions to expand in 2026, while DraftKings rolled out “DraftKings Predictions,” a standalone mobile and web product that lets eligible customers trade on contracts tied to real-world outcomes across multiple market types—launching first with sports and finance, with plans to add categories like entertainment and culture as the platform expands.
Yet this commercial momentum collided with state-level enforcement, as Connecticut’s Department of Consumer Protection issued cease-and-desist orders to KalshiEX, Robinhood Derivatives, and Crypto.com, alleging the firms were offering unlicensed online gambling through “sports event contracts” to Connecticut residents and ordering them to stop making those products available in the state.
Although Kalshi took the fight to federal court, with a judge granting the company temporary relief that prevents Connecticut from enforcing the order while the case moves forward and setting a briefing schedule and early-2026 hearing date, the case serves as another sign of how unsettled the line remains between state gaming laws and federally regulated event contracts.
Adding another layer of uncertainty, Coinbase Institutional’s Crypto Market Outlook 2026 flagged that U.S. taxpayers may face different tax treatment for traditional sports betting versus certain event contracts, a gap that underscores how quickly adoption is moving ahead of consistent, settled guidance.
The report argues that a change embedded in President Donald Trump’s One Big Beautiful Bill Act — set to take effect in 2026 and limiting how much gambling losses can be deducted against winnings — could nudge speculative activity toward blockchain-based prediction markets, which Coinbase said “could emerge as a more tax-advantageous substitute to traditional sportsbooks and casinos.”
Challenges and Future Outlook
With ICE backing Polymarket and contract design still being shaped in real time by courts and regulators, the industry enters 2026 better capitalized but still legally constrained — conditions that could either cement prediction markets as a durable financial product or splinter them across competing rulebooks.
Prediction markets’ path in 2026 will largely depend on three factors: how regulators and courts draw the line between “gaming” and legitimate hedging or price discovery; whether state gaming authorities and federal commodities regulators settle workable jurisdictional boundaries; and whether institutional partners such as exchanges, brokers, and market makers keep expanding liquidity beyond election-driven spikes.
Forecasts from Eilers & Krejcik see annual volume reaching $100 billion by 2026 and $1 trillion by decade’s end, while TradeFox AI co-founder Yoshi argues liquidity will consolidate around a small number of dominant hubs. Growth is expected to accelerate with institutional adoption and cross-chain interoperability.
On the crypto-native side, much of the next leg of growth is expected to play out on-chain, where settlement is programmatic and markets can plug directly into DeFi primitives. If that plays out, the next wave of likely features tighter DeFi integration, AI-enhanced oracles, and governance experiments (e.g. futarchy via MetaDAO where markets help guide decisions, not just predict them), turning markets into programmable truth engines for global decision-making.
In that model, Ethereum and its L2s are likely to remain the primary liquidity venues supported by deep capital pools and mature infrastructure, while Solana continues to attract high-frequency, consumer-facing markets that benefit from low latency and low fees. The practical result is a two-track on-chain ecosystem: liquidity-dense networks optimized for collateral efficiency and composability, and speed-optimized chains built for rapid price discovery and high-throughput trading.