The prediction market sector reached $127.5 billion in cumulative notional volume as of February 2026, with 2.49 million unique users and open interest exceeding $1 billion. Polymarket and Kalshi together control approximately 79% of tracked volume. Their combined valuations stand at $20 billion ...
"CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans' access to event contracts and undermine the CFTC's sole regulatory jurisdiction over prediction markets. This power grab ignores the law and decades of precedent." — Michael S. Selig, CFTC Chairman
The prediction market sector reached $127.5 billion in cumulative notional volume as of February 2026, with 2.49 million unique users and open interest exceeding $1 billion. Polymarket and Kalshi together control approximately 79% of tracked volume. Their combined valuations stand at $20 billion — $11 billion for Kalshi, $9 billion for Polymarket — following $3.3 billion in capital raises completed within 41 days of each other in late 2025.
The industry now faces a structural inflection. Robinhood closed its acquisition of CFTC-licensed exchange MIAXdx on January 20, 2026. Coinbase acquired The Clearing Company in early 2026. Both are building vertically integrated exchange infrastructure that could disintermediate Kalshi, which currently routes more than half its volume through Robinhood. Meanwhile, Jump Trading negotiated equity stakes in both Polymarket and Kalshi in exchange for market-making services — the first major proprietary trading firm to formally enter the space with dedicated headcount.
The economic question is no longer whether prediction markets work, but who captures the margin. The answer will depend on regulatory outcomes in at least five ongoing state-versus-federal jurisdiction battles, and whether the platforms' current fee economics can sustain their decacorn valuations.
As of late February 2026, the prediction market industry processes approximately $5 billion to $6 billion in weekly notional volume. Polymarket leads cumulative notional volume at $56.07 billion; Kalshi follows at $44.71 billion. Together they account for 83.9% of all tracked weekly volume, a concentration that has increased for three consecutive weeks, according to DeFi Rate data.
Weekly transaction counts reached a record 38.01 million in February. Polymarket led with 22.58 million transactions; Kalshi recorded approximately 15 million. The Super Bowl on February 8 generated $1.34 billion in single-day notional volume across tracked platforms, with Kalshi capturing 64.9% ($871.5 million) of that total.
The platforms serve different constituencies. Kalshi derives 85% of its notional volume from sports markets. Polymarket is more diversified: sports (39%), politics (34%), and crypto (18%) account for more than 90% of activity. Polymarket users place larger individual positions; Kalshi benefits from higher-frequency retail flow driven through distribution partners.
This duopoly structure mirrors early derivatives exchange consolidation. The two platforms have captured market share through different strategies: Kalshi via U.S. regulatory compliance and retail distribution partnerships; Polymarket via a crypto-native, globally accessible model built on Polygon.
Kalshi reported $260 million in revenue for 2025, up from $24 million in 2024 — a 10.8x increase. The NFL season alone contributed $138 million in a single quarter. Kalshi charges approximately 7% to 12% of the spread on a round trip, and its fee model has been live since launch.
Polymarket, by contrast, operated with near-zero revenue through most of 2025 despite processing $33.8 billion in trading volume. The platform launched a taker fee system in January 2026, piloted first in cryptocurrency markets, then expanded to sports on February 18, 2026. In its first week, Polymarket generated over $1 million. Trailing 30-day revenue as of late February stood at $3.18 million, according to DefiLlama data. The fee model takes approximately 2% of winnings on market orders.
The gap is instructive. Kalshi monetizes at roughly 0.76% of notional volume ($260M on ~$34B in 2025 activity). If Polymarket achieves a comparable take rate on its current run rate, annualized revenue could reach $400-$500 million. If it remains closer to its current 2% of winnings model at lower effective rates, the path to justifying a $9 billion valuation — roughly 35x Kalshi's revenue-to-valuation multiple — requires significant volume growth.
The most consequential development in the prediction market supply chain occurred on January 20, 2026, when Robinhood and Susquehanna International Group closed their acquisition of MIAXdx — a CFTC-licensed Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO).
Robinhood CEO Vlad Tenev has called prediction markets "the fastest-growing business we've ever had," citing volume that has doubled each quarter. One year after launch, 9 billion contracts have been traded by more than 1 million Robinhood customers. Robinhood currently accounts for more than half of Kalshi's volume.
The MIAXdx acquisition transforms Robinhood from broker to self-clearing exchange operator. Once the exchange begins operations — expected in 2026 — Robinhood can internalize the fee revenue it currently shares with Kalshi. This represents an existential risk to Kalshi's current distribution model.
Coinbase pursued a parallel strategy, acquiring The Clearing Company in late 2025. The Clearing Company, founded by Toni Gemayel (who previously worked with both Kalshi and Polymarket), uses digital ledger technology to clear and settle trades in stablecoins. Coinbase's stated ambition is an "Everything Exchange" encompassing crypto, derivatives, equities, and prediction markets within a single interface.
The implication: the two largest U.S. crypto retail platforms — Robinhood (which also operates as a traditional brokerage) and Coinbase — are building proprietary exchange infrastructure. The prediction market venues they currently partner with may become competitors they bypass entirely.
In February 2026, Jump Trading negotiated equity stakes in both Kalshi and Polymarket in exchange for providing market-making services. The deal structures differ: Jump's position in Kalshi is a fixed equity stake, while its Polymarket stake grows based on the volume of liquidity it supplies. Jump assembled a team of more than 20 traders dedicated to event contracts and built custom technology infrastructure for the business.
The arrangement follows the venture-style model common in early-stage derivatives exchanges, where market makers receive equity rather than traditional rebates. Given the platforms' combined $20 billion valuation, even small percentage stakes represent material positions.
Jump's entry is significant because it signals that quantitative trading firms view prediction markets as structurally analogous to derivatives venues — not as novelty gambling products. Like traditional futures exchanges, prediction markets require professional market makers for continuous quoting, tight spreads, and reliable price discovery.
Susquehanna, another major proprietary trading firm, entered through a different path: its joint venture with Robinhood to acquire MIAXdx. The Philadelphia-based firm is positioned to both make markets and co-own exchange infrastructure — a level of vertical integration unusual even in traditional finance.
On February 4, 2026, the CFTC withdrew its proposed "Event Contracts" rule, originally published June 10, 2024, which would have broadly defined "gaming" to include contracts based on athletic competitions. CFTC Chairman Michael Selig criticized the original proposal as "merit regulation" and said the accompanying 2025 staff advisory "inadvertently created confusion and uncertainty."
Two weeks later, on February 17, the CFTC filed an amicus brief in the Ninth Circuit asserting exclusive federal jurisdiction over event contract markets.
The withdrawal removed the immediate threat of a blanket federal ban. But the state-versus-federal jurisdictional battle is far from resolved. As of late February 2026, active litigation includes:
The regulatory outcome will determine market size. If federal preemption holds, prediction markets operate under a single CFTC framework nationwide. If states retain authority, the industry faces a patchwork of prohibitions similar to the early U.S. sports betting landscape — a scenario that would constrain retail access and volume growth.
Mapping the prediction market value chain reveals where economic value accrues:
Exchange operators (Kalshi, Polymarket) capture fees on trading activity. Kalshi's ~0.76% effective take rate on notional volume produced $260 million in 2025 revenue. Polymarket's nascent fee model is generating approximately $3 million per month at launch.
Distribution partners (Robinhood, Coinbase, Interactive Brokers) currently route volume to exchanges in exchange for revenue sharing. This layer captured an undisclosed but material portion of Kalshi's economics. These partners are now building their own exchange infrastructure, meaning distribution margin may collapse for incumbent platforms.
Market makers (Jump Trading, Susquehanna, unnamed others) capture the bid-ask spread. In exchange for continuous quoting, they receive both trading profits and, in Jump's case, equity stakes valued against $20 billion in combined platform valuations.
Data consumers (Bloomberg, CNN, CNBC, the Federal Reserve) derive informational value. A Federal Reserve paper found that Kalshi prices have "comparable accuracy to the New York Fed Survey of Market Expectations" and "beat the Bloomberg consensus for the consumer price index." ICE's $2 billion investment in Polymarket included data distribution rights.
Blockchain infrastructure (Polygon, for Polymarket) captures minimal direct fees but benefits from transaction volume and ecosystem activity. Polymarket's on-chain settlement generates gas fees, though these are negligible relative to total platform economics.
The structural risk is disintermediation. If Robinhood and Coinbase successfully vertically integrate — routing volume through their own exchanges, clearing through their own DCOs, and distributing through their own retail apps — the current platform duopoly could erode rapidly. Kalshi's $260 million revenue is built on a distribution model that may not survive 2026 intact.
The prediction market sector has crossed a threshold. Combined platform valuations of $20 billion, weekly transaction volumes exceeding $5 billion, and a Federal Reserve paper validating the informational utility of event contract pricing collectively mark the transition from experimental to institutional.
The core tension is structural. The platforms that built the market — Kalshi and Polymarket — face disintermediation from their own distribution partners. Robinhood and Coinbase are building exchange infrastructure that could bypass existing venues entirely. The regulatory environment, while trending favorable at the federal level, remains contested across multiple state jurisdictions.
The economic sustainability question mirrors broader patterns in financial infrastructure: early movers build the market, but vertically integrated incumbents with captive retail distribution may ultimately capture the margin. Whether Kalshi and Polymarket can defend their positions — through proprietary market design, network effects, or regulatory moats — will determine whether $20 billion in combined valuations represents fair value or peak pricing.