The Future of Prediction Markets: A Trillion-Dollar Boom?

Prediction markets are poised for tremendous growth in the coming years, as highlighted by analysts from the investment bank Bernstein. These markets, where people trade contracts based on the outcomes of future events, are moving beyond niche interest into mainstream financial territory.

Prediction markets handled about $51 billion in trades last year — three times more than the previous year. In a note to investors this week, analysts, led by Gautam Chhugani, tied the increase to people moving their trading from the 2024 U.S. election cycle to focus more on sports, cryptocurrencies, and big-picture political and economic events.

“Increasing regulatory clarity at the federal level (vs. state-regulated traditional frameworks) is expanding the addressable market, while blockchain-based tokenization and integration with crypto markets is enabling global liquidity, long-tail event creation and participation from institutions,” the analysts said.

Here’s a detailed look at Bernstein’s optimistic perspective on the future of this emerging sector.

What Makes Bernstein a Prediction Markets Expert?

Bernstein is known around the world as a top company for equity research and brokerage. They offer a trading platform that operates in Europe, the U.S., Asia, and the Middle East. Investment managers all over the world look for Bernstein’s research and trading services because of their strong reputation for quality and deep industry knowledge.

In 2019, Bernstein made an important move by acquiring Autonomous Research, a respected firm known for its independent research in financial services. This acquisition made Bernstein even stronger in providing top-quality research to clients globally.

In 2024, Bernstein partnered with Société Générale to launch a new venture. This expanded their global cash equities and equity research business. Clients now have greater access to equity markets and services, along with Société Générale’s expertise in equity derivatives, prime services, and capital markets.

Massive Growth on the Horizon

Bernstein projects that the annual trading volume on prediction platforms will soar from approximately $51 billion in 2025 to an astounding $1 trillion by 2030. That translates to an impressive compound annual growth rate (CAGR) of about 80% over five years. They anticipate trading volumes to reach around $240 billion this year.

On the revenue side, the fees collected by these platforms are expected to grow from about $500 million in 2025 to $10.8 billion by 2030 — a more than 2,000% increase. This financial forecast highlights a future where prediction markets expand beyond isolated events, evolving into comprehensive “information markets” that cover a wide range of topics, including sports, politics, economics, cryptocurrency, and culture.

Key Growth Drivers

Surge in 2024: The 2024 U.S. presidential election provided a significant boost to prediction markets. Platforms like Polymarket and Kalshi saw trading volumes in the billions as participants speculated on outcomes like swing states and presidential candidates. These platforms often outperformed traditional polling methods in predicting results.

Diversification in 2025: The growth momentum continued beyond politics. Prediction markets expanded into new areas, such as sporting events, cryptocurrency fluctuations, and macroeconomic developments. Volumes for 2025 were estimated between $40 billion and $60 billion, with some months experiencing peaks of over $20 billion. While sports betting initially attracted many users, Bernstein believes the sustainable growth will come from broader event-driven hedging and speculative activities.

Future Growth Catalysts

• Regulatory Clarity: In the U.S., clearer regulations will likely encourage mainstream partnerships by reducing uncertainty. This will be crucial as platforms navigate classification as either gambling or derivatives markets.
• Wider Distribution: Potential collaborations with big financial players, like Robinhood and Coinbase, could bring millions of new users and enhance market liquidity.
• Structural Advantages: Prediction markets often offer superior liquidity and efficiency compared to traditional betting markets, attracting interest from institutions for hedging against real-world risks, such as economic outcomes or policy changes.
• Institutional Participation: Bernstein notes a shift toward increased professional and institutional involvement, moving beyond simple retail sports betting.

Sports Betting vs. Prediction Markets: What’s the Difference?

While sports betting and prediction markets might seem similar because both involve betting or trading on sports, they are quite different in how they work, their rules, and what they might become in the future. Let’s take a look at how each one works in 2026.

How They Work:

Sports Betting (like DraftKings, FanDuel):

• Against the House: When you place a sports bet, you’re betting against the bookmaker, often called “the house.”
• Fixed Odds: The bookmaker sets fixed odds. For example, you might see odds like -110.
• Built-in Margins: These odds include a margin (like 4-10%) that helps the bookmaker make money.
• Winning and Losing: If you win, you get paid according to the odds at the time you placed your bet. The bookmaker makes money from losing bets, and the margin they included.
• Payouts: Once you place your bet, the payout is fixed. Some options let you change your bet while the game is happening, but those are limited.

Prediction Markets (like Kalshi, Polymarket):

• Peer-to-Peer Trading: Here, you’re trading with other people, not against a bookmaker.
• Event Contracts: You trade event contracts that are usually about “Yes” or “No” outcomes.
• Market Prices: The prices, like $0.62 for “Yes,” show what everyone thinks the chance is (62% in this example).
• Real-Time Trading: You can buy or sell at any time, and prices change as people get new information.
• No House: There is no bookmaker. What you earn depends on how well you predict the result and trade with others.
• Platform Fees: The platforms make money by charging small trading fees, often between 0.5% and 2%.

Quick Summary

• Sports Betting: Feels like gambling against a casino with fixed rules.
• Prediction Markets: Feels like trading stocks or futures, where prices change based on what people think will happen.

Both have their unique ways of operating and appeal to different kinds of users. Whether you’re interested in the sport itself or the challenge of predicting outcomes, each offers its own set of risks and rewards.

Navigating Regulatory Risks

Regulatory challenges, particularly around the classification of prediction markets, pose some risks. However, Bernstein downplays the likelihood of regulatory actions stifling growth. Instead, they suggest that clearer guidelines will foster sustainability and growth.

Some platforms have already achieved regulatory approval or are successfully operating in crypto-friendly environments.

The Broader Impact of Prediction Markets

Prediction markets allow traders to speculate on outcomes of real-world events, potentially providing more accurate forecasts than traditional methods. While their growth has been rapid and can be volatile, the rising levels of engagement — evidenced by increasing open interest — indicate a deepening attachment beyond mere speculative trading.

Bernstein’s bold forecast depends on continual technological innovation, user adoption, and favorable regulations. If their predictions hold, prediction markets could revolutionize the way uncertainty is priced, affecting sectors as varied as elections and economic data analytics.

In essence, Bernstein envisions prediction markets evolving into a trillion-dollar asset class, blending aspects of betting, derivatives, and information aggregation. With the potential to significantly reshape industries, this sector is on the brink of transforming how people, businesses, and institutions anticipate and react to future events.