The era of “everything can be gambled” has arrived! The revenue of the “prediction market” led by Kalshi and Polymarket is expected to quadruple

The Zhitong Finance App learned that a team of analysts from Citizens Financial Group Inc., a well-known financial institution on Wall Street, said in a research report that the overall revenue of prediction market companies (prediction markets companies) such as Polymarket may be five times the current market size by 2030, to a super scale of more than 10 billion US dollars in revenue.

Statistics show that world-renowned paid forecasting companies such as Kalshi Inc. and Polymarket have recently surged in their event-based contracts; these contracts provide a regulated paid betting method that allows people to make paid bets on sports, politics, and cultural events in the form of the stablecoin USDC — for example, during the 2024 US presidential election, PolyMarket is popular all over the world due to its exclusive prediction market ecosystem.

Devin Ryan from Citizens and his leading team of market analysts estimate that the industry's current annual revenue is around $2 billion. They believe that at Robinhood Markets Inc., the world's favorite internet securities trading platform that provides Kalshi contract trading, this forecasting business is the product with the fastest user expansion in the history of this internet securities platform, and has contributed about 10% of the company's revenue scale.

What is a “prediction market company”? Why is it so popular

What is the definition of a “predictive market company”? They are essentially trading platforms that turn real-world events into tradable binary contracts: contracts are usually settled “yes/no” (such as whether an event occurred), and the price can be interpreted as the market's pricing of probability; in the US context, such contracts are often packaged as regulated derivatives “event contracts.”

Needless to say, important channels such as Robinhood, which have a large investor base, introduced relevant contract transactions, and traditional giants such as ICE and CME entered the market in the form of investments or new platforms, significantly increasing the credibility and reach of users of the entire forecasting industry.

The prediction market enters sports in the form of “event contracts,” which in some states can attract trading volume even without legal sports betting. Therefore, it has become an important source of incremental growth for platforms such as Kalshi so far, and has also sparked compliance disputes and attention at the state level. More importantly, some Wall Street investment institutions and professional trading funds have begun to use it to bet/hedge the probability of macro and corporate events (such as the Federal Reserve's monetary policy, the success or failure of large-scale mergers and acquisitions) because of the dualistic contract structure and more “pure” expressions.

A “prediction market company” usually refers specifically to platforms such as Kalshi and Polymarket that provide “event contracts (event contracts)” transactions. Recently, players that have also been frequently mentited/entered on the same circuit include Crypto.com (an industry lobbying organization with Kalshi) and Gemini, which has just received US regulatory approval to promote predictive market business; while traditional exchanges/sports betting companies are also speeding up their entry (for example, a new trading platform jointly created by CME+FanDuel, ICE) investment in Polymarket).

Hedge funds and traditional asset management institutions may participate in the “prediction market” on a large scale

Analysts from Citizens concluded in a research report sent to clients on Monday that the forecast market still has room for stronger “exponential” growth in the future, because leveraged asset management institutions such as hedge funds, and some traditional asset management institutions will tend to use these markets to bet on the latest policy actions of global central banks and the probability of large-scale mergers and acquisitions.

Ryan said in an interview: “We did some similar research and comparison with the adoption process of products such as early options — we saw a strong level of early penetration, which allows us to deduce future multiples of growth corresponding to the dollar value being traded today.”

The prediction market provides an exclusive way to bet on sporting events even in states where gambling is illegal, and this has so far taken up the vast majority of Kalshi's prediction business.

According to Citizens analysts, this itself is a huge business opportunity: legal gambling is a global market of about 100 billion US dollars. Sports betting companies have also recently begun introducing event contracts to participate in predicting market competition.

Citizens analysts said in the research report that the forecasting market provides a direct and dualistic way to bet on major economic and corporate events, which may be quite useful to a wide range of investors. They believe that the reason this is likely to be a huge success is because predictive market exchanges can launch major event contracts very quickly compared to traditional trading platforms, and “because they provide unrivaled accuracy in expressing exclusive views and hedging specific risks that are difficult to fully isolate with traditional tools.”

Ryan, an analyst from Citizens, said, “We're still in the very early stages, and people are focusing on sports because the activity is there. I think this misses the bigger picture. “Greater rewards will come from a broader forecasting market — around the big things that influence the economy or company's decisions.”

Kalshi and Polymarket sell “probability” to institutions, and the next stop will be to embed quantification and risk control workflows

Analysts continue to write that such transactions may also generate odds and signals, and will “embed in institutional investment workflows in a manner similar to today's credit spread measures, option bias indicators, and implied volatility, providing important input information for quantitative investment models, risk control and management dashboards, and macro-asset allocation frameworks.”

Some large financial exchange companies have also recently entered this business area. Intercontinental Exchange Inc. (Intercontinental Exchange Inc.) is investing up to $2 billion in Polymarket; the US Chicago Mercantile Exchange Group (CME Group Inc.) and sports betting company FanDuel (a subsidiary of Flutter Entertainment Plc) have launched a new level of transactional application.

However, the industry is still facing major regulatory issues, but Wall Street analysts generally believe that there are examples in the cryptocurrency and options trading market that can be used to address these issues.