Prediction markets are evolving from websites for political bets into a broader category of financial contracts covering elections, sports, weather, economic data and corporate events.

Platforms such as Kalshi and Polymarket allow traders to buy contracts whose value depends on whether a specific outcome occurs. Their growing popularity suggests event probabilities themselves are becoming a tradable financial product.

The expansion is also bringing prediction markets closer to traditional exchanges, institutions and regulators.

Election Markets Show Rapid Growth

Trading around US politics has accelerated significantly. As of August, approximately USD 133 million had already been traded on contracts linked to the US midterm elections, surpassing the USD 92.4 million traded across the entire 2024 congressional election cycle, according to data cited by Reuters. If the existing pace continued, researchers projected volume could eventually reach USD 1.6 billion.

The number of available election-related markets has also increased about 16-fold compared with 2024.

That creates more opportunities to trade individual outcomes rather than simply predicting which party will win an election.

Wall Street is Starting to Treat Event Contracts as Hedging Tools

Institutional interest is expanding beyond politics. Cantor Fitzgerald has begun providing roughly 3,000 institutional clients, including hedge funds and family offices, access to Kalshi event contracts. Potential applications include weather risks, commodity production, corporate results and technology supply chains.

An agricultural business, for example, could potentially use a weather contract to offset the economic impact of unusual temperatures. Investors could similarly hedge event-specific risks that do not map cleanly onto stocks or conventional derivatives.

Kalshi is pushing even further into traditional markets. The company recently filed with the Commodity Futures Trading Commission (CFTC) to offer perpetual contracts tied to equity indexes.

Prediction Markets are Becoming Large Businesses

The valuations being discussed around leading platforms show how seriously investors are taking the category.

Polymarket has reportedly held fundraising discussions at a valuation exceeding USD 20 billion, after previously reaching a USD 15 billion valuation. Kalshi was reportedly valued at around USD 22 billion, with cumulative contract volume substantially ahead of Polymarket. Growth, however, is attracting greater scrutiny.

Insider Information Creates a Unique Risk

Unlike conventional markets, certain event contracts can reward individuals who possess confidential political, military or corporate information.

Research cited by Reuters identified more than 150 Polymarket wallets suspected of unusual trading around military events. Those wallets reportedly generated USD 8 million in profits with a 97.2% win rate, although the researchers acknowledged that the evidence did not establish wrongdoing.

Legal disputes are also growing over whether states can regulate event contracts as gambling or whether federal derivatives law takes precedence.

Prediction markets may ultimately become a new financial asset class, but their success will depend on whether regulators can distinguish legitimate forecasting and hedging from gambling and trading on protected information.

Also Read: Best Decentralized Prediction Markets in 2026

FAQs:

1. What are crypto event contracts?

Event contracts are financial instruments whose payout depends on whether a specific event occurs. They can cover elections, sports, weather, economic data or corporate outcomes.

2. How large is election-related prediction market activity?

About USD 133 million had already been traded on contracts linked to US midterm elections by August. That exceeded the USD 92.4 million traded during the entire 2024 congressional election cycle.

3. Why are institutions interested in event contracts?

Institutional investors can use event contracts to hedge specific risks such as weather, commodity production or corporate developments. Cantor Fitzgerald has opened Kalshi access to about 3,000 institutional clients.

4. How valuable are Polymarket and Kalshi?

Polymarket has reportedly discussed fundraising at a valuation above USD 20 billion, while Kalshi was reportedly valued around USD 22 billion. These figures show how rapidly investor interest in prediction markets has grown.

5. What are the biggest risks facing prediction markets?

Key concerns include insider information, gambling regulation and uncertainty over whether state or federal rules should apply. Unusual trading around sensitive political or military events has also increased scrutiny.