How Prediction Markets Became Finance’s New Power Center
What began as an obscure corner of the internet—used mostly by technologists and political obsessives to forecast election outcomes—ended 2025 as one of the most disruptive forces in modern finance. Prediction markets did not simply grow this year; they crossed a structural threshold. By December, they were simultaneously intersecting with Wall Street capital, federal regulators, mainstream media distribution, professional sports leagues, and crypto-native infrastructure.
This shift did not follow a smooth or linear trajectory. It unfolded through lawsuits, regulatory brinkmanship, strategic acquisitions, and a gradual normalization of a once-controversial idea: that probabilistic markets, rather than expert commentary or polling, might deserve a permanent role in how societies price the future.
On paper, the numbers alone were decisive. Industry-wide trading volume reached an estimated $44 billion in 2025, with weekly turnover on leading platforms rivaling levels historically associated only with major sportsbooks. Yet the more consequential transformation was qualitative. Prediction markets stopped behaving like speculative novelties and began operating as financial infrastructure.
Why Did Prediction Markets Keep Growing After the 2024 Election?
Historically, prediction markets followed a familiar boom-and-bust cycle. Activity surged during major political events and collapsed once outcomes were resolved. The 2024 US election cycle initially appeared no different. Participation spiked sharply in the final months before voting day, as traders speculated on electoral outcomes, turnout levels, and policy scenarios.
What followed in early 2025, however, broke precedent. Instead of fading into dormancy, activity migrated. Liquidity flowed first into sports-related contracts, then into economic data releases, crypto milestones, and technology-driven events. The infrastructure built for political forecasting proved adaptable to far broader use cases.
By January, Polymarket was averaging more than $1 billion in monthly trading volume—an unprecedented level for a category once dismissed as fringe. Kalshi, operating under federal oversight, leaned aggressively into short-duration sports and macroeconomic contracts, positioning itself as a regulated alternative to traditional betting platforms.
Underneath this expansion, legal uncertainty loomed. Both platforms understood that scale would force confrontation with regulators who had long tolerated prediction markets precisely because they were small.
Investor Takeaway
The post-election persistence of liquidity signaled that prediction markets had matured beyond event-driven speculation. For investors, this marked the transition from cyclical hype to structural demand.
Did Regulation Threaten or Accelerate the Industry?
In the first quarter of 2025, prediction markets spent as much time in courtrooms as on trading dashboards. Kalshi returned to federal court to challenge restrictions on political event contracts, while state regulators—most notably in New Jersey—argued that event-based contracts constituted unlawful gambling.
Rather than chilling participation, these legal battles appeared to legitimize the sector. Traders interpreted lawsuits not as existential threats but as confirmation that prediction markets had grown too influential to ignore. Legal risk became a feature, not a deterrent.
Innovation accelerated alongside confrontation. Blockchain-native protocol Myriad launched an onchain, non-custodial prediction market using stablecoins, reinforcing the convergence between crypto settlement rails and event-based trading. At the same time, New Jersey issued a cease-and-desist order against Kalshi.
Kalshi’s response set the tone for the year: it sued back. The strategy was clear—litigate aggressively while continuing to operate. Prediction markets would not pause growth while waiting for regulatory consensus. They would force the issue.
Investor Takeaway
Legal confrontation acted as a growth catalyst rather than a brake. Markets that survive regulatory stress tests often emerge stronger, with higher barriers to entry for future competitors.
Why Was April the Inflection Point?
April marked the moment when regulatory ambiguity tilted decisively in favor of the industry. A federal judge blocked New Jersey’s enforcement action against Kalshi, accepting—at least provisionally—the argument that federal commodities law preempts state gambling statutes.
Days later, the Commodity Futures Trading Commission dropped its appeal in a separate election-contract case, leaving a pro-market ruling intact. While neither decision eliminated regulatory risk entirely, the signal was unmistakable. At the federal level, prediction markets had legal standing.
Trading volumes reacted almost instantly. Kalshi posted hundreds of millions of dollars in activity tied to fast-resolving sports contracts. Liquidity deepened across categories, and spreads tightened as participation broadened.
From that point forward, the industry shifted from defensive posture to expansion mode.
Investor Takeaway
Federal-level validation reduced tail-risk scenarios. For capital allocators, April reframed prediction markets from regulatory experiments into investable platforms.
When Did Growth Become Impossible to Ignore?
By May, weekly volumes on Kalshi alone approached $1 billion. While sports dominated headlines, a quieter transformation unfolded beneath the surface. Participation in economic indicators, crypto-related outcomes, and technology milestones accelerated steadily.
Institutional observers began reframing prediction markets less as betting venues and more as data instruments. Venture capital firms that once viewed the category as regulatory poison started modeling it as a new class of derivatives exchange—one optimized for retail accessibility and real-time information aggregation.
This reframing mattered. It opened the door to partnerships that would have been unthinkable only a year earlier.
Investor Takeaway
The narrative shift from “betting” to “information markets” unlocked institutional interest. Structural adoption often follows semantic reclassification.
How Did Distribution Change the Industry’s Trajectory?
June delivered confirmation that prediction markets had crossed into mainstream financial distribution. Polymarket disclosed it had acquired a small CFTC-licensed exchange, laying the groundwork for a compliant return to the US market.
More consequential was Kalshi’s distribution partnership with Robinhood. For the first time, prediction markets appeared directly inside a mass-market financial app used by millions of retail traders.
This was not merely a user-acquisition deal. It was an endorsement of prediction markets as legitimate financial products—worthy of placement alongside stocks, options, and crypto assets.
Investor Takeaway
Distribution, not product innovation, often determines market dominance. Embedded access inside retail platforms dramatically expands addressable liquidity.
Why Did Capital and Culture Shift Together?
Throughout the summer, funding flowed into the sector. Polymarket raised additional capital ahead of its US relaunch, drawing interest from both crypto-native funds and traditional venture firms. Kalshi expanded aggressively, adding new categories and marketing initiatives that signaled confidence rather than caution.
Prediction market odds began appearing in public spaces—subway ads, billboards, and financial media—an unmistakable marker of normalization. Behind closed doors, policymakers debated whether these markets could serve public forecasting functions.
No legislation emerged, but the mere existence of such discussions marked a shift. Prediction markets were being evaluated as tools, not threats.
Investor Takeaway
Cultural legitimacy often precedes regulatory clarity. Once public perception shifts, policy tends to follow rather than lead.
What Changed When the US Door Reopened?
September delivered one of the year’s defining moments: Polymarket regained approval to operate in the United States. The timing aligned with major sports seasons and renewed political speculation, pushing combined weekly volume across leading platforms beyond $2 billion.
State-level resistance persisted, but it increasingly appeared symbolic. Liquidity followed clarity, and clarity—however partial—had arrived.
Investor Takeaway
Regulatory reentry unlocked pent-up demand. Markets often price access itself as a form of value creation.
When Did Wall Street Fully Step In?
October marked the moment prediction markets stopped being primarily a crypto narrative and became a Wall Street one. Intercontinental Exchange, owner of the New York Stock Exchange, announced plans to invest up to $2 billion in Polymarket.
The implied valuation placed prediction markets alongside established financial exchanges. Kalshi followed with a major funding round that pushed its valuation into the upper tier of fintech.
At the same time, Google began integrating prediction market data into search and finance tools, embedding probabilistic forecasts directly into the information layer of the internet.
Investor Takeaway
Infrastructure adoption matters more than volume. Once integrated into information systems, prediction markets become difficult to dislodge.
Why Did Records Fall in November?
November shattered expectations. Combined industry volume reached historic highs, with total annual trading estimated near $44 billion. Both Kalshi and Polymarket cleared multibillion-dollar monthly totals, while new competitors crossed billion-dollar weekly thresholds.
Media adoption accelerated. Yahoo Finance embedded prediction market data directly into articles, while CNN prepared on-air segments featuring market-implied odds. Sports partnerships expanded to include high-profile leagues, cementing prediction markets as part of mainstream sports culture.
Investor Takeaway
Media integration amplifies legitimacy. Once markets inform narratives, they influence behavior far beyond traders.
Did December Signal Consolidation or Fragmentation?
December closed the year with both expansion and fragmentation. DraftKings launched a federally compliant prediction app across dozens of states, validating the regulatory path forged earlier in the year.
Meanwhile, crypto-native entrants integrated prediction markets directly into wallets, bringing event trading into Web3 environments. Participation diversified beyond sports, with economics, technology, and politics posting the fastest growth rates.
Lawsuits lingered. State-level resistance remained unresolved. Yet none of it slowed adoption.
Investor Takeaway
Competition is intensifying, but regulatory moats favor early movers. Scale and compliance will likely determine long-term winners.
Why 2025 Permanently Changed Prediction Markets
By year’s end, prediction markets no longer resembled speculative curiosities. They blended regulated exchanges, blockchain settlement, real-time data, and crowd-based forecasting into hybrid instruments that defied easy classification.
They functioned simultaneously as financial instruments, information aggregators, media inputs, and behavioral experiments. This multi-functionality explains their resilience. Attacks from one angle—legal, moral, or cultural—failed to undermine their value from others.
What Question Remains Unanswered?
Prediction markets exited 2025 with momentum, capital, and cultural relevance. What they lack is a final form. The next phase will determine whether they mature into durable financial infrastructure or remain volatile hybrids vulnerable to political backlash.
One conclusion, however, is unavoidable. Prediction markets are no longer asking permission. The debate has shifted from survival to scope.
After 2025, there is no going back.
Michael Lebowitz is a financial markets analyst and digital finance writer specializing in cryptocurrencies, blockchain ecosystems, prediction markets, and emerging fintech platforms. He began his career as a forex and equities trader, developing a deep understanding of market dynamics, risk cycles, and capital flows across traditional financial markets.
In 2013, Michael transitioned his focus to cryptocurrencies, recognizing early the structural similarities—and critical differences—between legacy markets and blockchain-based financial systems. Since then, his work has concentrated on crypto-native market behavior, including memecoin cycles, on-chain activity, liquidity mechanics, and the role of prediction markets in pricing political, economic, and technological outcomes.
Alongside digital assets, Michael continues to follow developments in online trading and financial technology, particularly where traditional market infrastructure intersects with decentralized systems. His analysis emphasizes incentive design, trader psychology, and market structure rather than short-term price action, helping readers better understand how speculative narratives form, evolve, and unwind in fast-moving crypto markets.