The prediction market trading business continues to surge in 2026, with volumes on pace to more than quadruple this year and potentially reach $1 trillion within four years, according to private wealth management firm Bernstein. Activity has already jumped sharply, with leading platforms Kalshi and Polymarket generating about $60 billion in volume so far this year, exceeding the $51 billion recorded in all of 2025.
Analysts say the growth rivals the artificial intelligence boom. Bank of America highlighted Kalshi as one of the fastest-growing non-AI U.S. companies, with weekly trading volume soaring past $3 billion from about $100 million a year ago, as interest expands beyond elections into sports, crypto and macroeconomic markets.
Economics, business and political contracts to form bedrock of valuation
Bernstein analyst Gautam Chhugani said clearer federal regulation, growing crypto integration and blockchain tokenization are going to turbo-charge liquidity, while the types of contracts traded are also expected to evolve.
But much of the economic development in the sector will center around the public In an investor note, he said: “We expect the institutional market to develop around economics, business and political contracts, as investors seek more direct and discrete exposure to events. We also expect hedging demand from corporates, [and] insurance firms exposed to specific event risks.”
Prediction markets are already taking eye-watering amounts on some of the biggest sporting events in the calendar. This year’s Masters saw more than $545 million wagered on Kalshi, including $460 million on the winner, marking the platform’s second-highest volume behind the 2024 presidential election. Rory McIlroy won the event for a second straight year.
Kalshi CEO Tarek Mansour said prediction markets and sportsbooks are fundamentally similar, though regulatory uncertainty remains.
Chhugani unconcerned by legal issues
Prediction markets are facing mounting legal challenges as regulators and courts grapple with how to classify the fast-growing industry. At the center is a fundamental dispute: whether platforms operate as federally regulated financial exchanges or as unlicensed gambling operations subject to state law.
A patchwork of lawsuits and rulings has deepened the uncertainty. States including Arizona, Massachusetts and Nevada have filed cases or enforcement actions, arguing the platforms violate gambling laws, while federal regulators contend they fall under the Commodity Futures Trading Commission’s jurisdiction.
Recent court decisions have been mixed, with some siding with federal oversight and others allowing state restrictions. The conflict has prompted calls for Supreme Court intervention, as lawmakers also raise concerns about consumer protection, taxation and insider trading risks tied to event-based betting.
However, Chhugani believes the legal issues will not slow down the wider sector. He said: “Despite ongoing state-level legal challenges, we expect platforms like Kalshi, Polymarket, and public proxies (HOOD, COIN) to benefit from increasing regulatory clarity and growing alignment with federal regulators (SEC, CFTC) — a key driver of market legitimacy and mainstream adoption”.
Upward trajectory set to continue
For now, the trajectory appears firmly upward. Rapid gains in trading volume, expanding use cases and growing institutional interest are positioning prediction markets as a potentially durable segment of the broader financial ecosystem. What began as a niche tool tied largely to political outcomes is quickly evolving into a platform for pricing risk across sports, business, economics and global events.
Still, the industry’s long-term shape will likely depend on how regulators resolve the current jurisdictional disputes. A clearer framework could unlock further growth, while prolonged legal uncertainty may slow adoption among more risk-averse participants. Even so, analysts increasingly view the sector’s momentum as difficult to reverse.
If current trends hold, prediction markets may move beyond their speculative roots and become a mainstream mechanism for forecasting and hedging real-world events. In that scenario, their expansion would reflect not just a surge in betting activity, but a broader shift in how information, probability and risk are traded in modern markets.
