Prediction markets traded $51 billion in 2025 and are on pace to reach $240 billion in 2026, according to Bernstein analyst Gautam Chhugani. Industry revenue has grown from roughly $400 million in 2025 to an estimated $2.5 billion in 2026. Against that backdrop, the two dominant platforms — Kalsh...
"We'll continue to be an aggressive policeman when it comes to insider trading on our markets, as will the DOJ." — Michael Selig, Chairman, Commodity Futures Trading Commission
Prediction markets traded $51 billion in 2025 and are on pace to reach $240 billion in 2026, according to Bernstein analyst Gautam Chhugani. Industry revenue has grown from roughly $400 million in 2025 to an estimated $2.5 billion in 2026. Against that backdrop, the two dominant platforms — Kalshi and Polymarket — are diverging sharply in regulatory posture, market share, and business model, even as the CFTC drafts the first comprehensive rulebook for event contracts.
Kalshi raised $1 billion in its May 2026 Series F at a $22 billion valuation, reports annualized revenue of $2 billion, and hosts approximately 90% of U.S. prediction market volume. Polymarket, which re-entered the U.S. market after a four-year ban, filed for a Futures Commission Merchant license on July 3 to offer margin trading — while simultaneously facing a CFTC investigation over a campaign involving 1,105 promotional videos with staged trades that generated 140 million views. The sector's growth trajectory is undeniable. The regulatory and structural risks are equally real.
Total prediction market trading volume grew from less than $1 billion in June 2024 to $29.8 billion in April 2026 alone, according to CFTC filings and platform data. The number of active contracts expanded from roughly 220 across the full year of 2021 to more than 8,000 in the single month of May 2026.
Bernstein projects total 2026 volume of $240 billion — a 370% increase over 2025's $51 billion — with a compound annual growth rate of roughly 80% through 2030, when volumes are expected to approach $1 trillion. Revenue is scaling alongside volume: industry-wide take rates currently produce an estimated $2.5 billion in annual revenue in 2026, up from $400 million in 2025, per Bernstein's estimates.
The CFTC's own data underscores the shift. In 2025, CFTC-designated contract markets certified approximately 1,600 event contracts for listing. Seventeen new DCM applications have been filed since early 2025, with seven approved — including Polymarket's U.S. re-entry and Gemini's first crypto-native prediction market license. DraftKings launched as a CFTC-registered Introducing Broker in December 2025.
The competitive landscape has inverted. Kalshi, which spent years as the smaller, regulation-first platform, now commands the dominant market position in the U.S.
Kalshi processed approximately $33 billion in trading volume in June 2026. Monthly volume rose from $226 million in December 2024 to $6.6 billion in December 2025 and $29.2 billion by June 2026 — a 129x increase in 18 months. Annualized trading volume has tripled over the past six months, from $52 billion to $178 billion. The company reports roughly 2 million monthly active users and annualized revenue of $2 billion, according to CNBC. Its May 2026 Series F round, led by Coatue with participation from Sequoia, Andreessen Horowitz, and Paradigm, closed at a $22 billion valuation — double its $11 billion mark from five months prior.
Polymarket generated approximately $14 billion in combined U.S. and international trading volume in June 2026, roughly 42% of Kalshi's figure. Monthly trading volume peaked at $10.5 billion in March 2026 before declining to $8.9 billion in May. Open interest stands at $371.9 million with TVL of $399.7 million. The platform closed a roughly $200 million round on June 25 at approximately $1 billion, according to Forbes — a $21 billion valuation gap relative to Kalshi.
In May 2026, Kalshi collected $137.86 million in trading fees compared with Polymarket's $28.07 million — nearly a five-to-one revenue gap. According to Binance Research, Kalshi holds 58% of prediction market flow while Polymarket holds 28%.
On July 3, 2026, Polymarket's affiliate entity Coming Home GBA LLC filed for FCM registration with the National Futures Association, per Bloomberg. The filing represents an attempt to match Kalshi, which secured its own FCM license earlier in 2026 and has already established a regulated brokerage framework.
The FCM registration alone does not enable margin trading. Before offering leveraged event contracts, Polymarket must separately obtain CFTC approval to amend its rulebook to allow contracts that are not fully collateralized. This is a multi-step process with no guaranteed timeline.
Margin trading would allow users to take positions with less capital upfront — a structural change that could increase volume but also amplifies risk. In traditional futures markets, margin requirements serve as both a volume accelerator and a risk control. Applying them to binary event contracts — where outcomes are inherently discontinuous — introduces questions about appropriate leverage limits and liquidation mechanics that the CFTC has not yet addressed in rulemaking.
Kalshi's head start on the FCM license gives it a structural advantage in the interim. If Kalshi launches margin-enabled contracts before Polymarket completes the two-step approval process, the volume differential between the platforms could widen further.
On June 10, 2026, the CFTC issued a Notice of Proposed Rulemaking that would substantially revise the regulatory framework for event contracts traded on prediction markets. Public comments are due by July 27, 2026.
The proposed framework uses a three-step sequential analysis: (1) whether the contract is an event contract in an excluded commodity; (2) whether it "involves" an enumerated activity such as unlawful activity, terrorism, gaming, or similar activity; and (3) whether the contract is contrary to the public interest. This replaces a 2024 proposed rule — withdrawn by Chairman Selig in January 2026 — that would have prohibited political and sports-based event contracts outright.
Chairman Selig has drawn a clear line between prediction markets and sports betting. "Prediction markets and sportsbooks are two separate things," Selig told Axios in May 2026. "Conventional sportsbooks and casinos are entertainment and they have a lot of authority to be able to kick people out when they keep winning." The implication: prediction markets are financial products, and the CFTC intends to regulate them as such.
The regulatory pivot matters because it determines fee structures, compliance costs, and which entities can participate. A KPMG white paper published in 2026, titled "Prediction Markets: Paths to Entry," urged financial institutions to treat event contracts as strategic products rather than peripheral curiosities, noting their potential as tools for structuring exposure to macroeconomic developments, corporate events, and regulatory outcomes.
The CFTC confirmed in late June 2026 that it was conducting an extensive investigation into Polymarket's business and marketing operations, according to Bloomberg and CNBC.
The probe was triggered in part by a Wall Street Journal investigation that reviewed 1,105 promotional videos and found approximately 70% contained simulated trades rather than real market activity. The campaign generated over 140 million views across TikTok, YouTube, and Instagram. According to the WSJ, Polymarket paid mostly college-aged creators between $2,000 and $3,000 per month to film staged trades on dummy websites built to mimic the live platform. The creators were reportedly not required to disclose the sponsorship — a potential violation of federal advertising disclosure rules.
On June 25, Senators John Curtis (R-Utah) and Adam Schiff (D-Calif.) sent a bipartisan letter to CFTC Chairman Selig demanding answers by July 10 on whether the staged-trade conduct violated federal law, whether the CFTC had opened a formal investigation, and whether the agency had sufficient resources to police prediction market integrity.
Polymarket told CNBC it is conducting an internal audit of promotional content to ensure compliance. The company's timing is awkward: it filed for FCM status one week after the senators' letter and while under active CFTC investigation. Whether the investigation affects the FCM application's review process remains unclear, but the regulatory optics are unfavorable.
Sports contracts currently comprise approximately 39-40% of total prediction market volume, followed by politics at 32% and crypto at 20%, according to Polymarket platform data. Bernstein expects the sports share to decline to roughly 30% by 2030, with economics, business, and political contracts gaining share as institutional participants enter.
The institutional pipeline is materializing. In March 2026, Polymarket signed MLB as its exclusive Official Prediction Market Exchange Partner. In May, Polymarket launched prediction markets on unlisted companies, sourcing resolution data from Nasdaq Private Market. Kalshi CEO Tarek Mansour told CNBC that the company is considering an IPO, though not in 2026.
CME Group CEO Terry Duffy stated publicly that prediction markets need "solid regulation" to grow, indicating that legacy exchange operators are watching the space closely. Nasdaq CEO Adena Friedman echoed the sentiment: "Markets thrive when we have consistent regulation."
KPMG's 2026 report identified two prerequisites for institutional-scale adoption: sustained liquidity and clearer regulatory treatment. Both remain works in progress. The July 27 CFTC comment deadline for the proposed event contract framework will be a significant data point for institutional participants assessing entry timing.
The economic value distribution in prediction markets differs from traditional derivatives in several respects. The primary revenue mechanism is the trading fee — a percentage of notional volume captured by the platform operator. At current take rates, the industry generates roughly $2.5 billion in annual revenue on $240 billion in projected 2026 volume, implying an average take rate of approximately 1.04%.
Kalshi's fee structure appears more aggressive than Polymarket's. Kalshi's $137.86 million in May fees on its share of volume suggests a higher effective take rate than Polymarket's $28.07 million, even adjusting for volume differentials. The fee differential partly explains the valuation gap: Kalshi's revenue-based valuation multiple at $22 billion on $2 billion annualized revenue yields roughly 11x, while Polymarket's $1 billion valuation against a lower revenue base suggests investors are pricing it on growth potential rather than current economics.
Market-making revenue accrues separately to liquidity providers. In Polymarket's case, this layer operates on Polygon, with on-chain settlement providing transparency but also exposing trade flow to MEV extraction — a leakage channel absent in Kalshi's centralized order book.
The margin trading buildout will alter this calculus. Leveraged contracts generate higher notional volume per dollar of collateral, increasing fee revenue for platforms but also requiring capital reserves, clearinghouse infrastructure, and customer protection mechanisms that add to operating costs. Whether margin trading is net accretive to platform economics at this stage of the market's development is an open question.
The prediction market sector has grown roughly 240x in two years by volume. That pace of expansion has outrun the regulatory infrastructure designed to govern it. The CFTC's June 10 proposed rulemaking, with comments due July 27, represents the first comprehensive attempt to catch up.
The Kalshi-Polymarket competitive dynamic is clarifying. Kalshi's regulation-first strategy has produced market dominance, a $22 billion valuation, and a revenue base large enough to support IPO consideration. Polymarket's crypto-native approach delivered early growth but has created regulatory liabilities — the CFTC investigation and the FCM application filed mid-probe being the most visible examples.
Margin trading will be the next inflection point. Leveraged event contracts would increase capital efficiency and volume, but also introduce systemic risk in a market class that has never operated with margin. The CFTC has not yet addressed leverage limits for binary event contracts in its proposed rulemaking. Until it does, the margin buildout remains structurally incomplete.
The $240 billion volume and $2.5 billion revenue figures suggest prediction markets have crossed the threshold from novelty to financial infrastructure. The question is no longer whether the market will scale, but whether the regulatory and risk management frameworks can scale with it. The July 27 comment deadline is the nearest test.