Cato Institute weighs prediction market economics as Kalshi, Polymarket hit $2 billion monthly volume
The Cato Institute published an analysis of prediction market economics on October 29. The think tank cited roughly $2 billion in combined monthly volume for Kalshi and Polymarket in July 2025. It framed the two platforms as the dominant players in a sector experiencing rapid growth. The piece arrives as prediction markets draw renewed institutional and regulatory attention. Traders Magazine separately noted diverse business models among prediction market participants and operators. Neither source addressed the regulatory splits between Kalshi's CFTC-registered venue and Polymarket's dual-platform structure.
The Cato branding gives prediction markets intellectual cover that policy staff and judicial clerks actually read. Think tank validation matters because Kalshi and Polymarket face active state court fights over whether federal registration preempts state gambling law. Ohio and Tennessee have already rejected that preemption claim, and New Jersey has asked the Supreme Court to review a favorable appeals decision.
Cato's economic framing — efficient prices, information aggregation — arms defenders with language to push back against gambling classification. The July 2025 volume figure also supplies a concrete data point litigants and legislators will cite. If Cato's narrative gains traction in conservative legal circles, it could influence how appellate judges read the economic purpose of event contracts. That matters most at the Supreme Court, where judicial skepticism of gambling labels could flip preemption outcomes.
Joins a recent run of commentary and structural moves positioning prediction markets for institutional legitimacy, alongside Kalshi's Tradeweb and BMLL distribution push and hedge fund manager Berger's forecast that event contracts could outgrow stocks.