Prediction markets are experiencing steady growth in the United States, but a wave of legal disputes and changing competition is beginning to reshape the sector, according to a new report from Bank of America.
Total weekly volume increased 4% week over week, according to the report, with Kalshi, a federally regulated exchange, leading gains with 6%. Crypto.com saw a smaller increase, while Polymarket, a crypto-native platform that had surged in previous weeks, saw its overall volumes drop by 16%.
Kalshi now controls about 89% of the US prediction market’s measured volume, well ahead of Polymarket at 7% and Crypto.com at 4%, according to BofA estimates. The change points to a market that is consolidating around platforms with a clearer regulatory situation.
That division reflects a deeper tension. The central question is whether prediction markets should be treated as financial instruments or as games of chance. Kalshi operates under the supervision of the Commodity Futures Trading Commission (CFTC), and frames its contracts (including those linked to political or sports outcomes) as derivatives.
Polymarket runs on blockchain rails and has historically operated outside of US regulatory boundaries. It allows users to trade event outcomes using cryptocurrencies, often attracting global liquidity but facing restrictions at the national level.
The gap becomes more visible as regulators intervene. Nevada and Massachusetts have obtained preliminary injunctions against Kalshi at the state level, while New Jersey lost an appeal that limits its ability to enforce gambling laws against the company.
At the same time, the CFTC has taken an aggressive stance in support of prediction markets.
The agency has sued several states, arguing that federal law trumps state-level rules of the game. CFTC leadership has also drawn a distinction between sports betting, which it considers entertainment, and event contracts, which it classifies as financial tools to hedge risks.
The outcome of that fight could define the industry. A federal victory would allow platforms like Kalshi to scale nationally under a single framework. A loss could push the market toward a state-by-state model similar to online sports betting, slowing growth.
Cryptocurrency companies are still trying to gain a foothold. Polymarket remains one of the largest global platforms and has attracted attention during major events such as elections, where trading volumes can increase dramatically. Meanwhile, companies like Crypto.com and Coinbase (COIN) are experimenting with market-style prediction products, indicating broader interest from centralized exchanges. Binance, the world’s largest crypto exchange, announced on Thursday that it has added a market prediction feature to Binance Wallet.
Even traditional gaming companies are adapting. FanDuel recently shuttered parts of its fantasy sports offering, a move Bank of America links in part to the rise of prediction markets. The shift suggests that users may be moving toward products that are more like trading than gambling.
