What are prediction markets?

Prediction markets in the cryptocurrency sector continue to grow steadily — even during periods of correction in digital assets. According to DeFi Llama, as of September 2026, the total value locked (TVL) in prediction markets exceeds $400 million, while weekly trading volume on these platforms is approaching $4 billion.

In June of the same year, the combined trading volume of the two largest prediction market platforms — Kalshi and Polymarket — reached nearly $4.5 billion for the month. Since the beginning of the year, this figure has exceeded $300 billion in total, even though the volume of prediction markets did not reach $70 billion in 2025.

At the same time, prediction markets are one of the fastest-growing segments of the crypto industry. In April 2026 alone, trading volume in this sector rose by more than 580%, while the largest cryptocurrencies lost market capitalization.

What are prediction markets?

Prediction markets are platforms where users trade so-called event contracts. These are a special type of trading contract that emerged with the development of prediction markets and are tied to the outcome of specific events.

The first prediction markets appeared as early as the 1980s. Some of the early examples of prediction markets included projects such as Iowa Electronic Markets and Predictl. By 2014, during the early development of the crypto industry, the first blockchain-based prediction markets began to emerge.

One of the first projects to implement the idea of decentralized prediction markets was Augur, a platform built on the Ethereum blockchain. The platform operated autonomously and allowed users to trade on event outcomes using smart contracts that received information about external events through decentralized oracles*.

* Oracle — a service that obtains data from sources external to a blockchain, verifies it, and delivers it to smart contracts. Oracles are used when executing the terms of a smart contract requires information that is not available within the blockchain itself, such as market prices, sports results, election outcomes, or other verifiable real-world events.

After Augur, another platform — Gnosis — entered the prediction market sector in 2015. Augur and Gnosis continued to gain popularity until the decentralized finance (DeFi) boom in 2020. However, blockchain-related issues such as high fees, scalability limitations, and slow transactions led to declining activity on these platforms.

In the same year, 2020, Polymarket was launched in the prediction market sector. The platform rapidly gained popularity and became the most recognizable platform in the prediction market segment.

Until 2025, Polymarket was the leader in the prediction market, but it later lost its position to another major player — Kalshi. The prediction market platform Kalshi surpassed Polymarket in terms of TVL and trading volume and became the first regulated platform in its segment after receiving a license from the U.S. Commodity Futures Trading Commission (CFTC).

Why are prediction markets so popular?

The high popularity that has allowed prediction markets to compete with cryptocurrency exchanges for investors' attention has been driven by factors such as:

• Fast settlement thanks to high transaction processing speeds and the high throughput of blockchain protocols;
• Low commissions and fees, making even multiple small-value event trades economically viable;
• The ability to use stablecoins pegged to fiat currencies as the primary means of settlement on prediction market platforms;
• The accessibility of prediction markets to a broad range of investors regardless of their legal status or location.

The growth trend of prediction markets has also been strengthened by strong interest in the sector from major financial players. For example, the New York Stock Exchange (NYSE) announced plans to invest $2 billion in the Polymarket platform. At the same time, Coinbase, one of the largest cryptocurrency exchanges, launched a dedicated prediction markets section powered by Kalshi.

How do prediction markets work?

Prediction markets are not the equivalent of bookmakers. Instead, they are trading platforms where positions on event outcomes are structured as exchange orders rather than traditional bets.

Users earn returns based on whether they correctly predict the outcome of a particular event. Prediction markets have become an alternative for traders who lost money on depreciating tokens during market corrections and shifted their attention to other speculative instruments.

Each trade on prediction market platforms takes the form of a trading contract priced between $0.01 and $1. The price of an event contract reflects the probability of the selected event occurring, ranging from the result of a sports match to the outcome of a political election. For example, if an event contract costs $0.70, participants in the prediction market are effectively estimating the probability of that event occurring at 70%.

Once the event has concluded, smart contracts automatically calculate the result and distribute rewards among the winners. This approach is one of the defining features of prediction market platforms: users do not need to entrust their assets to third parties such as brokers or bookmakers. A smart contract cannot appropriate the assets for itself or freeze a trader's balance.

If a user correctly predicts the outcome of an event, the contract settles at $1. For example, if the contract was purchased for $0.70, the profit is $0.30 per contract. If the prediction proves incorrect, the contract loses its value, and the invested funds — either fully or partially, depending on the mechanics of the platform — may be lost.

Thus, the potential return directly depends on the current price of the contract. The higher the probability assigned to an event by the prediction market, the more expensive the contract and the lower the potential profit. For example, a contract priced at $0.90 will generate only $0.10 in profit if the prediction is correct. At the same time, a higher price generally means that participants in the prediction market consider that outcome more likely, so the risk of losing is perceived as lower.

Prediction markets also involve other risks, including vulnerabilities in smart contracts or oracles that provide data from the outside world.

Prospects for prediction markets

Analysts are generally positive about the prospects of prediction markets. For example, according to expert estimates, the volume of prediction markets could exceed half a billion U.S. dollars as early as 2027 and approach the $1 trillion mark by 2030.

Analysts also expect the prediction market user base to grow. Over the past year alone, this figure has tripled and exceeded 1 million people. Experts estimate the compound annual growth rate of the audience of prediction market platforms at 68%.

Several factors drive the positive trends in prediction market development. In the future, prediction markets could become one of the key risk-hedging tools in the decentralized finance (DeFi) sector.

The number of trading platforms integrating prediction markets into their interfaces is also growing: Gate has joined Coinbase by launching a new prediction markets section powered by the Polymarket platform.

The launch of prediction markets on exchange platforms could become a strong growth catalyst, bringing in a significant influx of users through exchange interfaces they are already familiar with.