Year in Prediction Markets: From Regulatory ‘Sinkhole’ to Multi-Billion Dollar Business
Prediction markets surged past $2 billion in weekly trading volume in 2025, marking a sharp shift for a category that had long sat on the margins of both crypto and traditional finance. Platforms including Polymarket and Kalshi benefited from a mix of growing mainstream interest, an influx of capital, and a regulatory environment that looked less adversarial than in prior years.
The rise was visible in headline numbers. Kalshi reported that its volumes are now surpassing $1 billion each week, with users able to trade across more than 3,500 markets, many tied to sports outcomes. Across the broader segment, prediction markets were also reported to have generated $28 billion in trading volume across the first ten months of the year, with some estimates putting global trading volumes at $44 billion in 2025.
In the U.S., the regulatory backdrop was a key part of the story. In October 2024, Kalshi won a lawsuit against the Commodity Futures Trading Commission (CFTC) in federal appeals court, a decision that allowed it to revive fully regulated election prediction markets. In 2025, the CFTC’s posture was described as moving from hostile enforcement to a more engaged approach, including hosting regulatory roundtables under Trump-era leadership.
That shift mattered because prediction markets sit at the intersection of derivatives regulation, gambling rules, and crypto infrastructure. As the category expanded into higher-profile event contracts—especially sports—friction with state-level stakeholders increased, including casino operators and gaming trade groups.
Industry growth continued even as legal challenges accumulated. Kalshi, Robinhood, and Crypto.com were reported to be facing more than 20 lawsuits and cease-and-desist orders from regulators and tribal interests. At the same time, operators pushed further into the mainstream through new products and media partnerships, with outlets and sports organizations cited among those participating in the trend.
Capital followed momentum. In 2025, platforms such as Kalshi and Polymarket raised hundreds of millions of dollars at multi-billion-dollar valuations, underscoring how quickly prediction markets had moved from niche experimentation to a large, investable sector.
Beyond volume, prediction markets gained visibility as tools for tracking the probability of real-world outcomes across politics, macroeconomics, and sports. Contracts tied to events such as NFL games and Federal Reserve decisions became part of the broader narrative of mainstream adoption, as more participants used market prices to express views on uncertain outcomes.
- Scale: Weekly volumes climbed above $2 billion across major platforms, with Kalshi alone reporting more than $1 billion per week.
- Regulatory context: A pivotal 2024 court win for Kalshi and a less combative tone from the CFTC reshaped the U.S. landscape.
- Mainstream pull: Media and sports-linked markets helped push event contracts into a wider audience, even as state gaming regulators raised objections.
- Capital inflows: Major fundraising rounds at multi-billion valuations signaled growing institutional interest in the category.
By the end of 2025, prediction markets had largely outgrown their earlier reputation as regulatory “sinkholes,” becoming a substantial and closely watched segment of the crypto economy—one expanding in parallel with ongoing legal disputes and renewed attention from regulators.