Chainfeeds Summary:
In the four months following the election, the monthly trading volume in the forecast market declined by 63%, from $4.6 billion in October 2024 to $1.7 billion in February 2025.
Article source:
https://x.com/0xWeiler/status/2001333522716303645
Article Author:
0xWeiler
Opinion:
0xWeiler: Prediction markets officially entered the mainstream during the 2024 US presidential election. For the first time, odds from Polymarket and Kalshi appeared alongside traditional polls, seen as an alternative indicator of voter sentiment, and ultimately outperformed traditional polls in predicting election results. In the five months leading up to the election, trading volume on the two platforms surged from $140 million in May 2024 to $4.6 billion in October, an increase of 3186%, making prediction markets one of the earliest crypto applications to break into the mainstream. However, political markets accounted for 62% of total prediction market trading volume in 2024, raising questions about their sustainability. In the short term, these concerns seemed to hold true: in the four months following the election, monthly trading volume plummeted from $4.6 billion to $1.7 billion, a drop of 63%. But in 2025, prediction markets quickly proved they were not solely reliant on political cycles. Since its low point in February, monthly trading volume on Polymarket and Kalshi climbed to $9.2 billion in November, a 441% increase from the low, and surpassed the all-time high before the 2024 election for three consecutive months. This growth was primarily driven by non-political markets, signifying that prediction markets have moved beyond election-driven real-world market matching. In 2025, the growth of prediction markets is primarily driven by the sports sector. From January to November, the sports market accounted for 58% of trading volume, approximately $23.1 billion, significantly outperforming the political (20%), crypto (11%), and culture (3%) sectors. A key catalyst for the sports market boom was Kalshi's partnership with Robinhood in August, allowing users to trade NFL and college football-related markets directly through their Robinhood accounts. This partnership significantly lowered the barrier to entry for non-crypto native users and provided US users with a compliant trading channel offering better odds than traditional bookmakers like DraftKings and FanDuel. Following the partnership, monthly trading volume in the sports market increased by 551% within three months. Despite this, the prediction market still represents a small percentage of sports betting. In 2024, the total legal sports betting volume in the US reached $150 billion, but the prediction market, limited by the lack of parlays and player props, did not yet cover approximately 30% of mainstream demand. Meanwhile, the cultural market became the fastest-growing sector in the second half of 2025, with monthly transaction volume increasing by 625% between August and November. The cultural market has virtually no alternative platforms and features high turnover and high-frequency settlement, making it a crucial breakthrough for the long-term expansion of the prediction market. By 2025, the prediction market's open interest (OI) was essentially a duopoly dominated by Polymarket and Kalshi, which together held 91% of the market share. During the year, Kalshi's OI grew by 258%, and Polymarket's by 133%, with both continuing to widen the gap with smaller platforms in terms of brand, capital, and distribution channels. Both companies accelerated their ecosystem development in 2025, increasing mainstream exposure through partnerships with CNN, CNBC, UFC, NHL, and Yahoo Finance, while also securing significant funding to lay the foundation for growth in 2026. In addition, new entrant Opinion quickly gained attention with its native BNB Chain positioning and AI-powered marketplace creation tools, becoming a potential third force. However, greater competitive pressure will come from traditional betting companies. DraftKings and FanDuel plan to enter the prediction market in 2026, focusing on the political and macroeconomic non-sports market to reach users their existing businesses cannot. Nevertheless, the crypto-native prediction market still holds advantages in the long tail market, diverse categories, and speed of innovation. Overall, even with increased competition, Polymarket and Kalshi are expected to maintain their dominant positions in the prediction market in 2026.
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