Betting on prediction markets has exploded over past two years – Financial Times
Prediction markets have ballooned 130 times in size over the past two years, as users have flocked online to make wagers on events in sports, politics and popular culture.
Bets placed on online platforms such as Polymarket and Kalshi have soared from less than $100mn a month in early 2024 to more than $13bn in November this year, according to a report from crypto firms Dune and Keyrock.
Prediction markets allow punters to place bets in the form of “event contracts” on the outcome of any public event, such as the release of inflation data, professional football play-offs or a US Senate election. Polymarket and Kalshi, the biggest businesses in the sector, have received multibillion-dollar valuations in recent months.
Kalshi raised $1bn at an $11bn valuation this month from investors including crypto investment firm Paradigm, Sequoia, Andreessen Horowitz and CapitalG. In October, Intercontinental Exchange, owner of the New York Stock Exchange, said it would invest up to $2bn in Polymarket, valuing the company at about $8bn.
Sports betting is outlawed in many US states but prediction markets have argued that they offer access to financial contracts, overseen nationwide by the Commodity Futures Trading Commission.
Prediction markets rose to prominence in the run-up to the 2024 US presidential election when bets placed on Polymarket predicted a decisive win for Donald Trump, whereas opinion polls predicted a much tighter contest.
While Polymarket previously dominated trading volumes, Kalshi’s presence has accelerated in recent months and the two companies now have roughly equal market shares, according to the report. About $9bn worth of bets were placed on the two platforms last month.
Competition between the two has heated up. Polymarket, which was previously banned in the US, received approval last month from the CFTC to offer its services through brokerages and directly to customers.
Both companies have announced a string of new partnerships with major sports leagues and others, and embarked on marketing blitzes. Google Finance displays probabilities based on betting data from both platforms, while Kalshi is teaming up with media outlets CNN and CNBC.
Sports bets far outstrip other categories on Kalshi, while Polymarket tends to have a more even distribution across sports and politics, the report found.
Betting on economic events is a fast-growing business for both companies. Users of Kalshi currently predict an 80 per cent chance that the Federal Reserve will keep interest rates unchanged in January.
Kalshi users are also betting on the Rotten Tomatoes rating for the latest Avatar film and the amount of snow that will fall in New York City this month. On Polymarket, users can bet on the winner of the latest season of reality TV show Survivor and on the number of times Elon Musk will post on his X platform during the week.
