Growth in prediction markets is increasing as traders look for more precise ways to price and hedge discrete events, from elections to rate decisions, without relying on hard-hitting indirect trades.
Prediction markets are running at an annualized revenue rate of more than $3 billion, up from $2 billion in December, and could hit $10 billion by 2030, according to a Monday report from U.S. bank Citizens.
The bank cited accelerated volumes, a stronger market structure and early institutional commitment, saying the trajectory reflects the early evolution of listed derivatives and digital assets.
“We continue to view ~$10 billion of annual industry revenue by 2030 as a reasonable medium-term benchmark rather than an end state,” analysts led by Devin Ryan wrote.
Prediction markets have rapidly grown from niche betting to a growing ecosystem of sophisticated trading platforms that aggregate probabilities of real-world events. Major players include Kalshi, an American exchange for event contracts regulated by the CFTC, and Polymarket, one of the largest decentralized marketplaces covering politics, sports, and economics. These platforms are attracting significant volume and attention from both major financial and regulatory bodies, reflecting broader growth and the shift towards institutional relevance.
Asset classes typically scale from retail-led liquidity to professional market makers and, eventually, institutional capital, driving a step change in depth and sophistication, analysts said, arguing that prediction markets are following that path.
January volumes were up more than 40% on December, and February followed a similar pace despite expectations of a post-football slowdown. While sports remain a key liquidity driver, activity is expanding into macroeconomic, political and regulatory events, areas more aligned with institutional demand.
Prediction markets allow investors to hedge discrete event risks, from inflation surprises to M&A approvals, without relying on proxy instruments such as index futures or options, reducing basis risk. By isolating specific outcomes, they provide targeted risk transfer and capital-weighted probability signals in real time, Citizens said.
Institutional participation is emerging first through data integration, liquidity provision, settlement standards and regulatory clarity, with direct trading expected to increase as infrastructure matures. While current revenue relies heavily on transactions, the bank’s analysts see growth in data, research and financing services as the ecosystem develops.
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