Prediction markets are growing steadily in the United States, but a wave of legal disputes and changing competition are beginning to reshape the industry, according to a new report from Bank of America.
Total weekly volume increased 4% week-over-week, the report said, with Kalshi – a federally regulated exchange – leading the gains at 6%. Crypto.com saw a more modest increase, while Polymarket, a crypto-native platform that had surged in previous weeks, saw its overall volumes drop 16%.
Kalshi now controls about 89% of the measured volume of the U.S. prediction market, far ahead of Polymarket at 7% and Crypto.com at 4%, according to BofA estimates. This change suggests a consolidation of the market around platforms with a clearer regulatory status.
This divide reflects a deeper tension. The central question is whether prediction markets should be treated as financial instruments or games of chance. Kalshi operates under the supervision of the Commodity Futures Trading Commission (CFTC), framing its contracts – including those linked to political or sporting results – as derivative products.
Polymarket runs on blockchain rails and has historically operated outside US regulatory boundaries. It allows users to trade on the outcomes of events using cryptography, often attracting global liquidity but facing restrictions domestically.
The gap is becoming more and more visible as regulators intervene. Nevada and Massachusetts both obtained preliminary injunctions against Kalshi at the state level, while New Jersey lost an appeal that limits its ability to enforce gambling laws against the company.
At the same time, the CFTC has taken an aggressive stance in favor of predictive markets.
The agency has sued several states, arguing that federal law preempts state-level gaming rules. CFTC leaders also drew a distinction between sports betting, which they consider entertainment, and event contracts, which they characterize as financial tools for hedging risk.
The outcome of this struggle could define the industry. A federal victory would allow platforms like Kalshi to expand nationally in a single framework. A loss could push the market toward a state-by-state model similar to online sports betting, slowing growth.
Crypto companies are still trying to carve out a role for themselves. Polymarket remains one of the largest global platforms and has attracted attention during major events like elections, where trading volumes can surge sharply. Meanwhile, companies like Crypto.com and Coinbase (COIN) are experimenting with market-style prediction products, signaling broader interest from centralized exchanges. The world’s largest cryptocurrency exchange, Binance, announced on Thursday that it has added a market prediction feature to Binance Wallet.
Even traditional gaming companies are adapting. FanDuel recently shut down part of its fantasy sports offerings, a move that Bank of America links in part to the rise of prediction markets. This change suggests that users may be moving toward products that more closely resemble trading than betting.
