Prediction markets, which leverage the wisdom of the crowd to facilitate trustless wagers on all manner of topics, have seen spectacular growth in recent years, helped largely by the amount of action surrounding the last US Presidential election.
Once regarded as a lawless form of gambling, crypto-native betting platforms have become legitimized, with some even federally regulated by the Commodity Futures Trading Commission (CFTC). As a consequence of one such platform, Kalshi, securing a partnership with Robinhood, over 2 billion prediction contracts were traded in Q3 alone.
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It is fair to say that prediction markets are only feasible in a decentralized finance system. In TradFi, regulators, centralized entities, and political pressures would render markets fragile or outright illegal. With blockchain acting as a trustless engine, however, such choke points are effectively eliminated.
So, how did prediction markets get to the stage where they’re considered an engine of DeFi’s evolution?
Mainstream Momentum
Prediction-based betting enables markets that are permissionless, censorship-resistant, and trustless: with smart contracts automating and enforcing the rules of the market, those placing bets don’t need to ‘trust’ a platform to settle up. Only in a decentralized environment can prediction markets truly flourish and scale globally.
Although technologically anchored to DeFi, prediction markets are penetrating the mainstream in a way that no other DeFi product has been able to do. Indeed, Wall Street traders recently dumped shares of online betting entities like DraftKings and Flutter Entertainment, following a steep uptick in prediction market activity. The implication? Prediction markets could wind up eating the sportsbooks’ lunch.
While prediction markets are closely associated with the 2024 Presidential election, Kalshi recently confirmed that its trading volume of $260 million on September 27 eclipsed the Election Day record of $245 million. The battle for the White House might have lit the touchpaper but the fire is still raging. Which isn’t to say politics doesn’t prove fertile ground for wagers: prediction market traders recently throw a ton of action on the length of time the US government shutdown would drag on for.
Blending Social Behavior and Money
Notwithstanding the fact that prediction markets are becoming more mainstream, with wagers placed on the stock market, sports, even the weather, it would be a mistake to equate them with old-fashioned gambling.
Syndicate co-founder Ian Lee has argued that prediction markets should be viewed as “social financial networks,” due to the way in which they aggregate and coordinate human intelligence and capital. In this respect, they share a deep connection with decentralized autonomous organization (DAOs): after all, both are coordination tools blending social behavior and money.
But there’s another important distinction worth making: prediction markets aggregate the insight of a wide range of people, who make judgments based on their assessment of future events. In other words, there is no self-interested intermediary sitting in the middle calculating their own margin while setting the odds. Instead, odds are calculated based on the supply and demand of buy and sell prediction tokens. Moreover, this lack of intermediary reduces the cost for users since there is no ‘vig’ imposed as the price of doing business.
A Brightening Regulatory Picture
A recent rise in the number of active markets traded shows that prediction markets are gaining serious traction. September saw over 33,000 markets traded compared to 13.8k the previous month, with volume almost tripling. Partly this is a consequence of a brightening regulatory picture: Polymarket is on the cusp of a US relaunch after a four-year exile following a CFTC ban. Since its banishment, the company has acquired CFTC-licensed exchange QCX LLC, in a move that appears to have expedited its return.
But it’s not just the big players like Polymarket and Kalshi who are growing. Other prediction platforms are pulling in millions in weekly trade volume. Platforms like Myriad, whose current markets include questions like ‘Will Donald Trump visit China in 2025?’ and ‘Bitcoin’s next move: Pump to $140K or Dump to $110K?’ Like many of its competitors, Myriad offers live AMM pricing, meaning odds are instantly updated as positions shift.
Launched by Decrypt’s parent company DASTAN in late 2025, Myriad saw record high trading volumes in September as its user base of over half a million placed wagers on topics related to crypto, politics, sports, and culture. Its success reflects the wider maturation of decentralized forecasting, which has undoubtedly become a pillar of DeFi.
More Bets, More Headlines
Whether you view prediction markets as the latest DeFi craze or a long-term bet (pardon the pun), there’s no denying their rise to prominence. Expect these disruptive platforms to continue making headlines as more participants enter the fray.
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People Also Ask:
A prediction market is a platform where participants can place bets or trade contracts on the outcome of future events. Prices in these markets reflect the collective probability of an event occurring, effectively aggregating the wisdom of the crowd.
In decentralized finance (DeFi), prediction markets operate on blockchain using smart contracts. These contracts automatically enforce rules and settle outcomes, eliminating the need for intermediaries and enabling trustless, censorship-resistant trading.
Unlike traditional gambling, prediction markets aggregate the insights of many participants rather than relying on odds set by a bookmaker. This reduces costs for users and provides a more accurate reflection of collective expectations.
Prediction markets demonstrate the unique advantages of DeFi—permissionless access, global scalability, and trustless execution—showing how blockchain can enable new financial tools that were difficult or impossible in traditional finance.
