From Polymarket to Gemini: How prediction markets are going mainstream

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How prediction markets work

Why did prediction markets suddenly become so visible if the mechanics are essentially straightforward? Because they offer a fast, intuitive indicator of market expectations in areas where traditional tools are either slow or only indirect. The price of a contract reflects the probability of an event: participants take positions for or against an outcome, and the quote shifts with news flow, liquidity, and the balance of supply and demand.

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Over the past few years, this format has moved beyond its niche for two reasons. First, major events brought in liquidity: during the 2024 U.S. presidential election, Polymarket generated more than $3.5 billion in volume and for several consecutive weeks signaled a higher probability of a Trump victory than any media outlet or traditional sportsbook.

Second, crypto infrastructure made the product easier to use: blockchain-based settlement simplified access, accelerated execution, and lowered the barrier for small wagers compared with traditional models.

Against this backdrop, Polymarket and Kalshi have emerged as two flagship venues in the space: Polymarket as the most liquid example within crypto, and Kalshi as a large regulated player expanding its lineup of event contracts while simultaneously fighting legal battles with individual states over how these products should be classified.

New players and regulatory shifts

Despite rising popularity, prediction markets still have a structural weakness: their regulatory status remains inconsistent and often depends on the jurisdiction. Kalshi operates under the U.S. federal legal framework as a regulated derivatives exchange, but it regularly faces pressure at the state level, where some contracts are treated as gambling. For similar regulatory reasons, Polymarket restricted access for U.S. users for years and is only now, in late 2025, able to return to the American market.

At the same time, demand and liquidity have done their job: the segment is attracting new entrants. Major financial platforms and trading venues are exploring the space — Robinhood and Interactive Brokers are developing or testing event-based contracts, while the owner of the NYSE (Intercontinental Exchange) is investing in this product class. In parallel, sportsbooks are looking for workarounds through event contracts as well: FanDuel has announced a standalone app for this format in partnership with CME Group.

The most notable new entrant is arguably Gemini, because it is entering the segment through a regulatory framework from the start. Days ago, an affiliated entity of the exchange received derivatives exchange status from the CFTC, giving it the right to launch regulated yes-or-no event contracts. Importantly, this is not a quick move to chase a trend: Gemini first filed for this status back in March 2020 and only received approval in December 2025 after a multi-year process. The initial product will likely be basic, but the admission itself matters more than the first set of contracts. Prediction markets are gradually moving out of a gray zone and into formal exchange infrastructure, where the rules are set not by the platform but by the regulator.

What the regulatory shift means for prediction markets

How does the segment change after such a regulatory pivot? First, legitimacy increases. Regulatory approvals blur the line between betting on outcomes and financial derivatives: once event contracts are recognized as an exchange-traded product, prediction markets become part of official markets with compliance, access requirements, and clearer rules for institutional participants.

Second, liquidity starts acting like a magnet. For events with mass audiences, volumes on prediction markets can surge dramatically. Most often these are sports markets (major tournaments and finals), as well as macro events such as Fed rate decisions and key inflation releases. In these periods, the segment attracts not only retail traders but also systematic participants — market makers, algorithmic strategies, and arbitrage desks that typically avoid niche instruments.

Third, greater scale brings stronger regulatory pressure and inevitable legal clashes. Even under a federal framework, individual states may still treat certain products as gambling and try to restrict or block them. The situation around Kalshi is a reminder that in the U.S., rules can vary by jurisdiction — and that becomes one of the key risks for the entire segment.

Dark side and upside

Prediction markets carry real risks — not just theoretical or regulatory ones. As volumes grow, questionable cases surface as well: on some Polymarket markets, contract outcomes reportedly coincided with unexpected edits to the data sources the platform relied on for settlement. That fueled suspicions that someone could be manipulating the source — or exploiting an information edge. There have also been unusually precise bets placed before information became public, raising the issue again of unequal access to data and potential insider activity.

Another concern is artificial activity: part of the volume may come from trades with little to no genuine risk, designed to create the appearance of liquidity and distort the signal for other participants. A further factor is low liquidity in niche events: according to Kalshi’s statistics, around 70% of traders lose money specifically on such markets. Ultimately, behavior on these platforms often starts to resemble gambling, increasing the risk of rapid losses for retail participants.

At the same time, the segment has tangible benefits that attract not only crypto enthusiasts but also institutional players. Modern prediction markets can serve as indicators of market expectations, delivering fast signals about the likelihood of future events — sometimes outpacing traditional polling. Blockchain-based platforms offer transparent, automated settlement via smart contracts, improving the speed and efficiency of settlement compared with legacy models. Recently, overall trading volumes in prediction markets have reached the tens of billions of dollars, pointing to meaningful liquidity and strong participant interest. These markets can also support risk hedging or act as an additional information source for assessing future outcomes in macroeconomics, politics, or corporate forecasting — making them a tool not only for speculation but also for interpreting expectations.

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