The Prediction Market Explosion (2025 in Review & 2026 Outlook — A Surgence Labs Intelligence Brief)

Prediction markets have undergone a structural transformation. What was a niche crypto derivative product in early 2024 is now a multi-billion-dollar financial infrastructure layer — processing comparable weekly volume to mid-tier stock exchanges, attracting institutional capital, and drawing the attention of the CFTC, the NYSE, and Wall Street’s largest retail brokerages.

The headline numbers tell the story clearly:

• Total 2025 trading volume across all platforms: ~$44B, with Kalshi and Polymarket generating ~$38–39B of that combined
• Weekly volumes as of early 2026: $5–5.3B and holding, with a Super Bowl record of $1.34B in a single day (Feb 8, 2026)
• The duopoly of Kalshi and Polymarket commands 83–90% of all volume — but the competitive layer beneath them is rapidly building
• The sector’s primary growth engine has shifted: sports is now the dominant category by volume, surpassing politics for the first time
• Regulatory tailwinds under the Trump administration are removing the primary existential risk that overhang the sector in 2024

By almost any measure, prediction markets delivered one of the most dramatic growth trajectories in fintech during 2025. The sector emerged from the 2024 U.S. presidential election cycle with massive momentum and didn’t slow down.

Volume Milestones

The growth trajectory is striking in context. The entire industry processed $2B in August 2025. By Super Bowl Sunday in February 2026, a single day exceeded that figure by 67%. Six-month growth across tracked platforms hit 13x.

Data Point to Approach with Caution: Some research reports cite ’12B+ contracts traded in 2025.’ Based on platform-level data, Polymarket processed ~95 million total trades and Kalshi ~74 million in 2025 — approximately 169 million combined. The 12 billion figure likely conflates dollar notional volume with contract counts and should not be used in client or investor communications.

The Duopoly

Kalshi and Polymarket have established a structural duopoly, accounting for 83–90% of all tracked prediction market volume as of early 2026. The remaining 10–17% is split across a growing but still fragmented competitive layer. Claims of ‘99% market share’ are an overstatement — the more accurate picture is a clear two-tier market where the gap between tier one and everyone else is substantial but not absolute.

A few important clarifications on the competitive narrative:

• Kalshi’s $11B valuation was confirmed December 2, 2025, via a $1B Series E led by Paradigm with Sequoia, a16z, CapitalG, ARK Invest, IVP, and Y Combinator participating. Total known funding now exceeds $1.6B.
• Polymarket’s backing is from ICE (Intercontinental Exchange) — the parent company of NYSE — not NYSE directly. The $2B strategic investment at an $8B pre-money valuation closed in October 2025.
• Kalshi’s market share advantage is heavily driven by sports, which accounts for 85–89% of its fee revenue. Polymarket is more diversified: sports (39%), politics (34%), crypto (18%).
• As recently as December 2024, Polymarket held 95% of combined market share. Kalshi’s regulatory clarity and retail distribution via Robinhood has dramatically shifted that balance through 2025.

Market Share Dynamics (Feb 2026)

Per DeFi Rate’s tracker (week ending Feb 22, 2026): Kalshi holds ~49.3% of weekly volume at $2.59B, Polymarket at 34.6% ($1.83B). The two combined represent 83.9% of all tracked platform volume — a figure that has trended upward for three consecutive weeks as smaller platforms struggle to maintain share.

Surgence Labs Perspective: The platforms we’ve worked with in this sector consistently face the same distribution challenge: Kalshi and Polymarket benefit from deeply embedded liquidity loops that make it harder for new entrants to offer competitive odds. Our GTM work in this space has focused heavily on niche-market creation, community-first liquidity seeding, and category-specific positioning, targeting verticals the duopoly underserves.

The Challenger Layer

While the duopoly dominates by volume, a structured second tier is taking shape — with institutional backing, distinct technical approaches, and targeted category differentiation.

One clarification on the Coinbase entry: The Clearing Company is an infrastructure/clearing-focused startup (not a consumer-facing market) founded by Toni Gemayel, previously head of growth at both Polymarket and Kalshi. It’s primarily an acqui-hire with a clearing infrastructure thesis — Coinbase is building prediction markets into its ‘Everything Exchange’ vision rather than acquiring a competing platform.

The Crypto.com–Truth Social partnership mentioned in some circulating reports could not be independently verified from primary sources and should be treated as unconfirmed.

Understanding category dynamics is essential for any operator positioning a prediction market product. The mix has shifted dramatically from the election-driven 2024 cycle.

Sports is the battleground. It’s where the volume concentrates, where the regulatory tension with state gaming commissions is highest, and where platform differentiation on breadth (Kalshi) versus liquidity depth (Polymarket) is most visible.

The economics/macro category is the most underappreciated growth driver. The 7x expansion reflects institutional and semi-institutional participants using prediction markets to hedge policy risk — a fundamentally different user profile than the retail bettors and election speculators who dominated 2024. This category’s growth is what will sustain volumes between major political events.

Regulation is no longer an abstract risk for prediction markets — it is the primary variable determining which platforms survive, scale, and attract institutional capital. The landscape is complex, jurisdictionally fragmented, and actively evolving.

Federal Level (CFTC)

• The CFTC has asserted exclusive federal jurisdiction over event contracts, treating them as derivatives rather than gambling products
• Kalshi won a landmark legal victory against the CFTC in May 2025, cementing its ability to offer election and sports markets
• The CFTC withdrew its proposed ban on sports event contracts in January 2026 — a significant industry win
• The Trump administration has adopted a notably more permissive stance than the Biden-era CFTC, reducing regulatory headwind substantially

State-Level Conflicts

• Multiple states continue to challenge prediction markets, classifying them as gambling subject to state gaming laws
• Connecticut, Nevada, and Arizona are active battlegrounds; Crypto.com lost a Nevada case and was forced to take sports contracts offline
• Kalshi won a key federal ruling preventing state enforcement against its platform (late 2025)
• Coinbase has filed lawsuits in Illinois, Michigan, and Connecticut over its right to offer prediction markets

Industry vs. Incumbent Gaming

• The American Gaming Association (representing casinos and traditional sportsbooks) is pushing for sportsbook-style state regulation
• The NCAA formally requested the CFTC suspend college sports markets
• The NYT has characterised this as a ‘war over sports betting’ — existing operators treating prediction markets as an unlicensed competitive threat

The Core Legal Question: Are prediction market contracts derivatives (CFTC jurisdiction, federally governed) or gambling (state jurisdiction, state-licensed)? Platforms and their legal teams argue derivatives. State gaming regulators argue gambling. The federal courts have so far sided with the CFTC/platforms — but this fight is not over.

Volume Catalysts

2026 is a structurally favourable year for prediction market volume. The calendar is stacked with high-engagement events that drive sustained platform usage rather than one-off spikes:

• 2026 FIFA World Cup (June–July) — the single largest global sports event; platform expansion into international markets will be essential
• 2026 US Midterm Elections (November) — the first major election cycle after prediction markets achieved mainstream status
• NBA Playoffs, MLB season, and college basketball (March Madness) provide sustained sports volume through H1
• Continued Fed rate cycle and macro event trading supporting economics category growth

Structural Trends to Watch

Surgence Labs has operated at the intersection of Web3 growth strategy and prediction market expansion for the past year. Our work in this sector spans the full growth stack:

• Volume and liquidity strategy — designing incentive structures and market creation playbooks that drive trading depth
• Community and user acquisition — building engaged user bases who generate organic volume rather than mercenary liquidity
• KOL and media network activation — tapping crypto-native and finance-adjacent audiences to expand the user funnel
• Token and incentive design — structuring rewards and airdrop mechanics that align user behavior with platform growth objectives
• Institutional and B2B positioning — helping platforms communicate their regulatory standing and data products to funds and media partners

We’ve worked across multiple prediction market platforms and protocols — from infrastructure layers to consumer-facing exchanges — with a consistent thesis: platforms that combine regulatory clarity, deep liquidity, and strong community infrastructure will define the next phase of this market.

This report is based on primary data from the following sources, cross-referenced and independently verified:

• Keyrock / Dune Analytics — 2025 prediction market volume and platform data
• The Block Data Dashboard — monthly and cumulative Kalshi/Polymarket volume
• DeFi Rate Prediction Markets Tracker — real-time weekly volume and market share
• Sacra Research — Kalshi revenue and volume estimates
• Gambling Insider — Prediction Markets Statistics 2026 (February 2026)
• Kalshi, Polymarket, Coinbase official announcements and press releases
• TechCrunch, CoinDesk, Reuters, Bloomberg — funding round coverage
• CoinDesk / Finance Magnates — regulatory and legal coverage
• Surgence Labs proprietary client and market intelligence

Note on data discrepancies: Where sources conflicted, we applied a conservative reading and cited primary data over derived estimates. The total 2025 volume figure of ~$44B reflects the most widely corroborated data point across Keyrock, The Block, and platform-level reporting. Figures citing $63B+ appear to extrapolate mid-year run rates and are not used in this report.

If you’re building a prediction market platform, launching a prediction market token, or looking to capture share from the events and liquidity categories in 2026 — we want to talk. Our team has the sector knowledge, network, and full-stack capabilities to move fast. Reach out to us.

DISCLAIMER

This report is published for informational purposes only by Surgence Labs. It does not constitute financial, legal, or investment advice. All market data is accurate as of publication date (February 2026). Surgence Labs may maintain commercial relationships with companies mentioned in this report.