Prediction Markets Hit $44 Billion Volume as Polymarket, Kalshi Compete on Regulation

Prediction markets are no longer a fringe crypto curiosity: in 2025, the sector’s total trading volume surpassed $44 billion, and the two dominant venues—Polymarket and Kalshi—spent the year not only competing for users, but also racing toward the kind of regulatory standing that can unlock mainstream financial distribution.

The shift matters because a long-running industry narrative—that “Polymarket can’t legally operate in the U.S., and Americans just use VPNs”—has stopped being broadly accurate. Polymarket was ordered to halt operations for U.S. users in January 2022 after the Commodity Futures Trading Commission (CFTC) levied a $1.4 million civil penalty over allegations it ran an unregistered derivatives platform. For nearly three years, the company blocked U.S. access. That changed in 2025.

In July 2025, Polymarket acquired QCEX, a CFTC-regulated derivatives exchange, for $112 million. The CFTC then issued a 'no-action' letter in September 2025 that effectively cleared the path for a relaunch, followed by a formal amended order granting updated 'Designated Contract Market (DCM)' status in November. Polymarket’s official return to the U.S. market came on Dec. 2, 2025.

Even with federal approval, state-level friction remains. Nevada’s Gaming Control Board filed a civil complaint in January 2026 alleging the platform offered event contracts without a state license, and regulators in states including Tennessee and Massachusetts have taken similar steps. The widening gap between federal permission and state enforcement has become one of the industry’s defining unresolved questions.

$44 billion: what the number actually signals

The sector’s 2025 volumes tell two stories at once: undeniable growth, and growing concentration. Polymarket and Kalshi accounted for an estimated 85% to 90% of global prediction-market trading. Polymarket posted about $21.5 billion in volume, while Kalshi recorded roughly $17.1 billion.

Kalshi’s growth was particularly steep. The platform’s 2025 volume jumped 1,108% year over year, with monthly activity rising from roughly $100 million–$200 million in 2024 to more than $6.3 billion by December 2025. Polymarket, meanwhile, hit a record 477,850 monthly active traders in October 2025, and the combined weekly volume of the two platforms at times exceeded $5.2 billion.

Context is essential when comparing these figures to crypto exchanges. Binance’s spot volumes over the same period were measured in the trillions of dollars, meaning claims that prediction markets are “bigger than major crypto exchanges” only hold up when referencing smaller venues rather than the market leaders. Still, for a sector that struggled to reach even single-digit billions a few years ago, $44 billion reflects structural expansion—more products, more distribution, and a clearer path to legitimacy.

Two strategies, two outcomes

Kalshi’s founders, Tarek Mansour and Luana Lopes Lara—both Harvard Business School alumni—built around regulation from day one. After launching in 2020, Kalshi spent roughly three years negotiating with the CFTC and ultimately secured DCM approval in 2023. That same year, a U.S. court decision supporting Kalshi’s right to list political event contracts validated the platform’s compliance-first thesis. In May 2025, the company further reinforced its operating footing by prevailing in litigation against the CFTC.

With regulatory footing in hand, Kalshi focused on distribution. Integrations with consumer-finance and crypto platforms such as Robinhood and Coinbase helped it reach beyond native crypto traders, contributing to an estimated 62% share of the global prediction-market segment in 2025.

Polymarket took the opposite route: scaling rapidly without U.S. regulatory clearance, then pivoting toward compliance only after enforcement. The cost of that sequence was time. The platform effectively ceded the U.S. market for nearly three years, allowing Kalshi to entrench itself. Even so, Polymarket used that period to expand internationally and grow into the largest global venue outside the U.S.

Investor appetite followed. In October 2025, Polymarket raised up to $2 billion from Intercontinental Exchange (ICE), a deal that implied an $8 billion valuation and later rose to roughly $9 billion as of February 2026, according to figures cited in the industry. Kalshi, for its part, has attracted backing from top-tier firms including Sequoia Capital, Andreessen Horowitz, and Paradigm, with reports placing its valuation around $5 billion.

When compliance becomes the moat

Kalshi’s CFTC designation is more than a legal checkbox—it functions as a competitive moat. DCM status creates a clearer channel for 'institutional demand' to enter without absorbing the same regulatory uncertainty that surrounds venues operating in gray zones or offshore structures. That dynamic helps explain why, even after Polymarket’s re-entry, Kalshi has continued to hold an advantage in U.S. activity.

New entrants are internalizing the lesson quickly. Gemini reportedly secured CFTC approval in December 2025 for an event-contract platform branded 'Gemini Titan' under DCM status. DraftKings has also launched a prediction-market app positioned separately from traditional sports-betting regulation. Crypto.com partnered with Fanatics to introduce an event-contract platform spanning sports, finance, and politics—an illustration of how quickly the product is being packaged for mainstream audiences once distribution partners believe the rules can be navigated.

The next fight: information asymmetry and insider trading

As trading expands, the industry is confronting the same questions that shadow traditional finance: who is trading on superior information, and when does an edge become illegal 'insider' behavior? Several high-profile incidents have sharpened the debate, including reports of anonymous traders placing large wagers ahead of politically sensitive events and later realizing substantial gains. In another widely discussed case, Israeli Air Force officers were accused of using knowledge related to military operations to profit on Polymarket, a matter that reportedly escalated into prosecution.

In Washington, lawmakers have begun to test whether prediction markets require bespoke guardrails. A bill introduced in the U.S. House of Representatives in 2026—the 'Public Integrity in Financial Prediction Markets Act'—would prohibit federal employees and elected officials from betting on political outcomes they could influence. The effort underscores a growing consensus that prediction markets may be effective forecasting tools, but their credibility hinges on whether they can prevent outcomes from being priced by participants with non-public information rather than superior analysis.

Capital markets have already delivered a verdict

Whatever the ideological debate around prediction markets—whether they represent market-based truth discovery or a new form of speculation—capital markets are treating them as a durable category. The valuations achieved by Kalshi and Polymarket, alongside strategic investments from firms like ICE and blue-chip venture backers, suggest investors see the sector moving steadily toward regulated financial infrastructure.

The overarching conclusion emerging from 2025’s growth cycle is straightforward: in prediction markets, regulation is not merely a barrier—it is increasingly a 'condition of entry'. Platforms that secured compliance early gained distribution and credibility, while those that bought or built regulation later paid for that pivot in time and opportunity cost, echoing a familiar lesson across the broader crypto industry.