The landscape of global finance is undergoing a fundamental shift as the "wisdom of crowds" transitions from a psychological theory into a trillion-dollar asset class. Once relegated to the fringes of the internet and academic experiments, prediction markets are currently experiencing a period of exponential growth that rivals the early trajectory of the artificial intelligence boom. According to a comprehensive new analysis by Bernstein, the total volume of these markets is projected to reach $1 trillion by the start of the next decade, marking a watershed moment for a sector that is rapidly redefining how society hedges risk and gathers information.
The momentum behind this surge is already visible in the 2026 market data. In the first few months of this year alone, trading volumes have reached staggering heights, on pace to more than quadruple the figures recorded in 2025. Bernstein’s report highlights that the sector is currently tracking toward an annual volume of $240 billion for 2026—a 370% increase year-over-year. To put this acceleration into perspective, the two primary heavyweights in the space, Kalshi and Polymarket, have already facilitated approximately $60 billion in trades year-to-date. This figure has already eclipsed the $51 billion in total volume generated across the entire industry throughout the 12 months of 2025.
This growth is not merely a statistical anomaly but a reflection of a deeper integration of event-based contracts into the broader financial ecosystem. Bank of America analyst Julie Hoover recently characterized Kalshi as one of the fastest-growing non-AI companies in the United States. The platform, which currently commands more than 90% of the regulated U.S. prediction market, has seen its weekly trading volume explode from a modest $100 million just a year ago to more than $3 billion today. This velocity suggests that prediction markets are moving beyond their initial identity as "political betting sites" and are becoming sophisticated tools for price discovery and risk management.
The evolution of these markets can be traced back to the 2024 U.S. presidential election, which served as a massive proof-of-concept for the industry. While many observers expected interest to wane following the election cycle, the opposite occurred. Throughout 2025, the market matured, shifting its focus toward a more diverse array of contracts including professional sports, cryptocurrency price movements, and macroeconomic indicators such as Federal Reserve interest rate decisions and Consumer Price Index (CPI) releases. The ability to trade on the outcome of real-world events has created a new form of "information liquidity" that traditional equity or bond markets cannot always provide with the same level of granularity.
Bernstein analyst Gautam Chhugani posits that the path to $1 trillion will be paved by a consistent compound annual growth rate (CAGR) of roughly 80% between 2025 and 2030. This optimistic outlook is predicated on several converging factors: the maturation of blockchain technology, the entry of major institutional players, and an anticipated shift in the regulatory climate. Chhugani notes that blockchain-based tokenization and integration with the broader cryptocurrency ecosystem are providing the necessary infrastructure for deep liquidity and 24/7 global access, allowing these markets to function with a level of efficiency that traditional centralized exchanges often struggle to match.
Perhaps the most significant shift expected over the next four years is the changing composition of the traders themselves. Currently, sports-related contracts dominate the landscape, accounting for more than 60% of total trading volume. However, Bernstein anticipates that this dominance will be halved by 2030. In its place, a robust institutional market is expected to emerge, centered on economics, business outcomes, and political policy shifts. For institutional investors, prediction markets offer a way to gain direct and discrete exposure to specific event risks that are often "muddied" when expressed through stocks or commodities.
Consider, for example, a multinational corporation with significant exposure to trade tariffs or specific regulatory changes. Rather than attempting to hedge this risk through complex currency plays or broad index shorts, a firm could theoretically take a position in a prediction market contract specifically tied to a legislative outcome. This "hedging demand" from corporate treasuries and insurance firms is expected to be a primary driver of volume in the latter half of the decade. As these markets become deeper and more liquid, they will likely serve as a form of "event insurance" for businesses operating in an increasingly volatile global geopolitical environment.
The entry of established public financial platforms is further legitimizing the sector. Robinhood and Coinbase Global have emerged as the primary public proxies for investors looking to capitalize on the prediction market trend. Robinhood’s dedicated prediction markets hub, now in its second year of operation, is already generating an estimated $350 million in annual recurring revenue. Accounting for nearly 30% of Kalshi’s total volume, the segment has become Robinhood’s fastest-growing business vertical. Industry analysts suggest this success could eventually lead Robinhood to develop its own proprietary exchange, further consolidating the market. Other major players, including DraftKings and Underdog, are also aggressively launching or expanding their own verticals to capture a slice of the burgeoning event-trading pie.
However, the road to a $1 trillion market is not without significant hurdles, primarily in the legal and regulatory arenas. A "pitched battle" is currently being fought between state regulators, federal agencies, and the platforms themselves. At the heart of the conflict is a jurisdictional dispute: some states view prediction markets as a form of unauthorized sports betting or gambling, while the Commodity Futures Trading Commission (CFTC) maintains that it holds the sole authority to regulate these platforms as derivatives markets.
The legal complexity is immense. Currently, legal actions are pending in 14 different U.S. states, and four separate congressional bills are working their way through the legislative process. Concerns regarding insider trading and market manipulation remain at the forefront of the regulatory debate. Some states, such as Arizona, have even initiated criminal misdemeanor charges against certain platforms, citing violations of state gambling statutes. Despite these headwinds, Bernstein’s Chhugani remains confident that the long-term outlook remains intact. He argues that the ongoing friction will ultimately lead to greater regulatory clarity at the federal level, with the SEC and CFTC eventually establishing a framework that provides the legitimacy required for mainstream institutional adoption.
From an economic perspective, the rise of prediction markets offers a fascinating look at the value of "incentivized information." Unlike traditional polling, which relies on what people say they believe, prediction markets require participants to put capital behind their convictions. This creates a powerful incentive for accuracy, often resulting in market prices that are more predictive of final outcomes than expert opinions or statistical models. As these markets grow, they will likely become an essential data source for economists, policymakers, and business leaders seeking a real-time pulse on global sentiment and the probability of future events.
The global context of this growth cannot be ignored. While the U.S. remains a central hub for the debate over regulation, international platforms like Polymarket have demonstrated the massive appetite for decentralized, borderless event trading. By leveraging stablecoins and transparent smart contracts, these platforms have bypassed many of the traditional barriers to entry, providing a glimpse into a future where any individual with an internet connection can "bet" on the outcome of a global health crisis, a technological breakthrough, or a foreign election.
As the decade progresses, the distinction between "investing" and "predicting" will likely continue to blur. If Bernstein’s projections hold true, the prediction market will not just be a trillion-dollar industry; it will be a foundational pillar of the modern financial system. The shift toward event-based contracts represents a move toward more granular risk management and a more democratic form of information gathering. While regulatory battles and questions of ethics will continue to dominate the headlines in the short term, the underlying momentum suggests that the financialization of reality is well underway, turning the world’s uncertainties into a new frontier of economic opportunity. By 2030, the ability to trade on the future may be as common as trading a share of stock is today, forever changing how we perceive, price, and prepare for the unknown.
