I. Introduction
In early January Beijing time, a message circulated on overseas social media platforms and multiple crypto communities: the US government had taken strong action regarding the situation in Venezuela, a development that drew significant international attention. Almost simultaneously, a transaction record on a decentralized prediction platform was rapidly amplified and discussed in the market.
Data shows that in just four days starting December 27, 2025, a single account on the prediction market platform Polymarket invested approximately $32,537, continuously betting on the event that "Venezuelan President Maduro will step down before January 31." It is noteworthy that this account established a large position in the hours leading up to the widespread discussion of the news.
At that time, the market's overall pricing of the probability of the event was not high, at around 6%. As the situation changed and the US government released its statements, the price of the account's positions rose rapidly, ultimately realizing a paper profit of over $400,000, with a return rate of more than ten times at one point.
Whether this transaction involved insider information remains to be investigated by regulators and the platform. However, it has already raised a crucial question: what exactly is this frequently mentioned Polymarket? And why did prediction markets gain such popularity in 2025?
This article will use this event to systematically introduce this rapidly expanding Web3 sector.
II. What is a prediction market? Why can it "pool collective wisdom"?
A prediction market is essentially a mechanism that aggregates disparate information through financial incentives.
In prediction markets, participants need to use real funds to trade and express their opinions on the outcome of an event. As different judgments continuously compete in the market, prices gradually converge to a level that reflects the "collective judgment probability." This mechanism allows prediction markets to, in certain scenarios, get closer to the true outcome than traditional questionnaires or subjective judgments.
This advantage was fully demonstrated during the 2024 US presidential election. Prediction market platforms, such as Polymarket, significantly outperformed traditional polling organizations in their probability assessments of the election results at several key points in time. The accuracy of their predictions was subsequently verified after the results were released.
As credibility continues to grow, prediction markets are beginning to be cited more widely:
Mainstream financial media outlets (such as Bloomberg) directly cited its odds data in their reports;
Search engines and AI question-answering products (such as Perplexity) display predicted market outcomes as reference information;
Prediction markets are gradually evolving from "insider tools within the crypto community" into one of the sources of public information.
In terms of market size, the industry is also experiencing significant growth. Multiple research institutions predict:
The total market transaction volume is projected to grow from approximately $900 million in 2024 to $40 billion by 2025.
The user base is projected to grow from approximately 4 million to 15 million.
At the capital level, prediction markets have also gained high recognition. By 2025, Polymarket and Kalshi had attracted a combined total of over $3.15 billion in funding, holding a dominant position in the industry. In October 2025, Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, announced a strategic investment in Polymarket, pushing its valuation to the $8-9 billion range. Meanwhile, Kalshi also completed multiple rounds of large-scale financing, with investors including several leading global institutions.
With multiple factors combined, prediction markets are widely regarded as one of the most representative Web3 sectors in 2025.
III. Market Prediction ≠ Gambling: The Fundamental Difference Between the Two Mechanisms
As prediction markets gain popularity, a common controversy arises: are prediction markets just "gambling in a different guise"?
From the perspective of underlying mechanisms, the two are fundamentally different.
1. Different price formation mechanisms
Prediction markets employ market-based pricing logic. Prices are determined by the interplay between buyers and sellers in a publicly available order book. All transaction data is auditable. The platform itself does not set probabilities or assume any risk regarding the outcome; it only charges transaction fees.
Betting platforms set the odds themselves, with their internal calculation logic remaining invisible. They ensure long-term profitability through "bookmaker advantage." The goal of adjusting the odds is not to discover the true probability, but rather to control platform risk.
2. Differences in function and purpose
The prices generated by the forecasting market are essentially a data product that can be used externally. They can be used for macroeconomic event judgment, policy expectation analysis, corporate risk management, and even have a reverse influence on media narratives and decision-making references.
Gambling activities are primarily entertainment consumption; their odds do not have spillover value, nor do they serve an information discovery function.
3. Differences in participant structure
Liquidity in the prediction market comes from information-driven participants, including researchers, macro traders, data analysts, and institutional users. Its core objective is to use information gaps for arbitrage and price discovery.
The liquidity of the gambling market mainly comes from ordinary consumers, which are more easily driven by emotions and preferences, and do not focus on the accuracy of information.
For this reason, prediction markets are often regarded as a "market for the flow of information" rather than a traditional form of entertainment and gambling.
IV. Why is it predicted that the market will experience a concentrated surge in 2025?
Prediction markets are not a new concept; their theoretical basis can be traced back to the last century. However, achieving large-scale growth depends on the maturity of multiple external conditions by 2025.
First, there was a key breakthrough at the regulatory level. The U.S. Commodity Futures Trading Commission (CFTC) gradually clarified the compliant status of prediction markets, defining them as commodity derivatives rather than gambling. This change allowed prediction markets to be distributed through a wider range of channels. After compliance, the reach of prediction markets in the United States even surpassed that of some traditional gambling businesses, reaching all 50 states.
Secondly, there was the restoration of institutional confidence and the influx of capital. With compliance boundaries clarified, the financing channels for prediction market platforms rapidly broadened, and multiple rounds of large-scale financing provided support for product experience, liquidity, and risk control systems.
Secondly, there's the expansion of event categories. From macro-political events, it has gradually extended to economic data, crypto industry events, and even sporting events, making the application scenarios for prediction markets more diverse.
Finally, there is the maturity of the technology. On-chain settlement, automated market making, and the application of AI tools in information analysis and transaction assistance have collectively lowered the barriers to participation and use.
These factors combined to make 2025 the year that the prediction market truly "broke out of its niche".
V. Risks and Boundaries: A Rational View of the Forecasting Market
It is important to emphasize that market prediction is not without controversy. The "early positioning" case mentioned at the beginning of the article also reflects that insider information, anti-manipulation, and compliance are still issues that need continuous improvement in this field.
It should also be made clear that mainland China explicitly prohibits related predictions and disguised gambling activities, and ordinary users should not participate in any activities that do not comply with local laws and regulations.
However, from the perspective of research and industry observation, prediction markets, as a tool for information aggregation and probability expression, still have value worth paying attention to and learning from in terms of systems, technology and product design.
For the Web3 industry, it offers a new direction: not simply focusing on "asset speculation," but on building data infrastructure that can be used by real society, centered around information, decision-making, and real-world events. This may be the real reason why prediction markets are being widely discussed in 2025.
