The growth of prediction markets is accelerating as traders seek more accurate ways to price and cover discrete events, from elections to rate decisions, without relying on heavy-handed proxy trades.
Prediction markets are showing an annualized revenue rate of more than $3 billion, up from about $2 billion in December, and could reach $10 billion by 2030, according to a report released Monday by U.S. bank Citizens.
The bank cited accelerating volumes, stronger market structure and early institutional engagement, saying the trajectory reflects the early evolution of listed derivatives and digital assets.
“We continue to view approximately $10 billion in annual industry revenue by 2030 as a reasonable medium-term goal rather than an end state,” wrote analysts led by Devin Ryan.
Prediction markets have quickly evolved from niche betting to a growing ecosystem of sophisticated trading platforms that aggregate probabilities of real-world events. Major players include Kalshi, a US event-driven contracts exchange regulated by the CFTC, and Polymarket, one of the largest decentralized markets covering politics, sports and economics. These platforms are attracting significant volume and attention from major financial and regulatory bodies, reflecting broader growth and the move toward institutional relevance.
Asset classes typically extend from retail liquidity to professional market makers and ultimately institutional capital, driving a step change in depth and sophistication, analysts said, arguing that prediction markets are following this path.
January volumes were up more than 40% compared to December, and February followed a similar pace despite expectations of a post-football slowdown. While sports remains a key driver of liquidity, activity is expanding into macroeconomic, political and regulatory events, areas more aligned with institutional demand.
Prediction markets allow investors to hedge the risk of discrete events, from inflation surprises to merger and acquisition approvals, without resorting to substitute instruments such as index futures or options, thereby reducing basis risk. By isolating specific outcomes, they provide targeted risk transfer and capital-weighted real-time probability signals, Citizens said.
Institutional participation first arises through data integration, liquidity provision, settlement standards and regulatory clarity, with direct trading expected to grow as infrastructure evolves. Although revenue today depends largely on transactions, the bank’s analysts predict growth in data, research and financing services as the ecosystem grows.
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