2025 Was the Easy Year: Prediction Markets’ Shift to Defense

The 2024 presidential election brought Kalshi and Polymarket mainstream attention. These two companies have spent 2025 expanding their reach, partnering with X influencers and mainstream news organizations.

That mainstream attention is a double-edged sword. While prediction markets have escaped from academia, they have also been unleashed on many people who view them as gambling platforms instead of forecasting or hedging instruments.

The industry’s PR challenges will be part of the larger challenge of holding onto the gains of 2025. While favorable regulations have allowed explosive growth, the prediction market industry will have to overcome its legal challenges and defend its new position to non-technical audiences.

Sports contract growth

Prediction markets have also expanded into new categories. Crypto.com self-certified the first sports contracts over the Christmas weekend of 2024. Kalshi followed shortly after the Trump administration took power. Caroline Pham’s CFTC asked for additional documentation proving these sports contracts adhered to CFTC regulations.

Since that request, sports contracts have grown from Super Bowl winners to include game lines, over/unders, and parlays. While the CFTC’s guidance has been sparse, a decision seems to have been made internally about sports contracts’ acceptability.

Contracts weren’t the only source of growth. Other platforms have commercialized and more are likely to follow.

Growing alongside crypto

Polymarket became a licensed DCM and launched its U.S. app with only sports contracts. So did the academic political prediction market, PredictIt. DraftKings and FanDuel also partnered with derivatives exchanges to launch prediction markets on sports, though not in all 50 states as Kalshi and Polymarket U.S. have.

Prediction markets are also poised to benefit from the looming expansion of crypto regulation. Pham launched a pilot program allowing the use of crypto for collateral, and Selig will oversee the full implementation of the CFTC’s initial rulemaking regarding cryptoassets. Prediction markets are one of the most popular crypto products, so new platforms could enter the industry, too.

Media organizations have also become interested in the instant odds on diverse events that prediction markets offer. CNBC and CNN partnered with Kalshi to feature the platform’s odds in different news stories.

Though institutional partners have bought into the forecasting benefits of prediction markets, people outside of elite circles view them as gambling platforms. Kalshi and Polymarket pushed to collect social media influencers. Aside from the challenge of trimming racists, trolls, and bots, both platforms had to reckon with influencers making specious arguments about the difference between event contract trading and gambling.

The legal line between event contracts and gambling is working through the courts. However, the prediction market industry now has to deal with a widespread PR loss of its own making.

Startup year is over

Kalshi and Polymarket may be able to call themselves startups on paper, but their rapid growth and institutional power are turning both companies into major financial players. The next year will be spent solidifying their gains.

Drawing a sharp line between gambling and investing has been poor social media messaging. Pivoting to a more nuanced message will be crucial as these companies defend the mainstream position they’ve worked so hard to secure.

The split between the two largest platforms, Kalshi and Polymarket, should also intensify in 2026. Polymarket has not joined the trade group formed by Kalshi, PredictIt, Underdog, and other regulated prediction market platforms. Any missteps that Polymarket makes won’t be distinguished from the rest of the regulated industry.

As some prediction market platforms try to carve out space under the CFTC, other platforms will continue to operate outside of the CFTC’s jurisdiction. Polymarket has its core site and a separate U.S. version. Other crypto platforms can experiment with new features like lending and leveraging that could later be adopted by regulated prediction markets.

The District Court cases will also be tested by appellate courts. Appellate judges will not only decide the cases on the merits, but they’ll also analyze the reasoning District Courts used to arrive at their decisions. The Third, Fourth, and Ninth Circuits will give prediction markets openings to reverse the legal momentum away from state gaming commissions and back into the prediction market industry’s favor.

Whatever struggles the prediction market industry has before it in 2026, they won’t be limited to the growing pains of 2024 and 2025.