What Are Prediction Markets?
Prediction markets are online platforms where people buy and sell shares based on the outcome of future events. These events can include political elections, sports results, or even company earnings. The price of each share reflects the market’s collective view of the probability that a certain outcome will happen. As more people trade, the prices adjust, providing a real-time forecast of what the crowd thinks will occur. In recent years, prediction markets have gained popularity for their ability to gather information and offer up-to-date forecasts on a wide range of topics. Both retail traders and institutional investors are using these markets to hedge risk and measure public sentiment.
Kalshi Overtakes Polymarket in U.S. Prediction Market Volume
In a major development for the industry, Kalshi has surpassed Polymarket in weekly trading volume within the U.S. prediction market sector. According to Dune Analytics data, Kalshi’s weekly trading volume recently exceeded $500 million, with an average open interest of about $189 million. This means Kalshi now accounts for 62% of the total on-chain prediction market volume, while Polymarket holds 37%. The surge in trading activity shows that more U.S. traders are turning to prediction markets as a way to speculate on real-world events. This growth is a sign that the industry is entering a new phase, with more money and attention than ever before.
Comparing Kalshi and Polymarket: Volume, Liquidity, and User Behavior
The difference between Kalshi and Polymarket is not just about trading volume. Kalshi’s higher turnover and more frequent trading activity suggest that its users are more active and engaged. In contrast, Polymarket’s open interest-to-volume ratio is higher (0.38 compared to Kalshi’s 0.29), which means Polymarket users tend to hold their positions for longer. This is likely because Polymarket focuses on longer-term markets that can last weeks or months, requiring users to lock up their funds for extended periods. As a result, Kalshi leads in liquidity and trading frequency, while Polymarket appeals to those interested in longer-term speculation.
Regulatory Challenges and Market Expansion
Despite trailing in volume, Polymarket is working hard to expand its presence in the U.S. The company recently acquired QCX, a regulated derivatives exchange, which allows it to re-enter the U.S. market legally. This move is important because regulatory compliance has been a major hurdle for prediction markets, especially in the United States. By securing a regulated platform, Polymarket aims to offer its services to a wider audience while staying within the law. This strategy reflects a broader trend in the industry, as prediction market operators try to balance innovation with regulatory requirements.
New Product Offerings and Partnerships
In addition to its regulatory efforts, Polymarket has launched new earnings-based markets in partnership with the social investing platform Stocktwits. These markets allow stockholders to hedge earnings risk and give analysts a way to gauge real-time market sentiment. By offering these products, Polymarket is positioning itself as a platform for both speculation and risk management. The partnership with Stocktwits also helps Polymarket tap into a large community of retail investors who are already active in the stock market. This move could help Polymarket attract new users and increase its market share in the coming months.
Why Prediction Markets Are Gaining Popularity
The recent surge in U.S. trading volumes on platforms like Kalshi and Polymarket can be traced to several factors. First, prediction markets offer a unique way to speculate on real-world events, which appeals to both casual traders and professional investors. Second, these markets provide valuable information about public sentiment and the likelihood of various outcomes. For example, the price of a contract predicting the outcome of a political election can serve as a real-time indicator of the public’s expectations. Finally, the rise of blockchain technology has made it easier to create decentralized and transparent prediction markets, which has helped attract a new generation of users.
Legal and Regulatory Landscape in the United States
The legal status of prediction markets in the United States remains complex. While some platforms have obtained regulatory approval, others operate in a legal gray area. For example, Kalshi is a regulated exchange, which gives it a significant advantage in attracting U.S. traders. In contrast, Polymarket has faced regulatory challenges in the past but is now working to comply with U.S. laws through its acquisition of QCX. The regulatory environment is likely to evolve as prediction markets become more popular and attract greater scrutiny from lawmakers and regulators. For now, platforms that prioritize compliance are better positioned to succeed in the U.S. market.
Impact on Financial Markets and Public Discourse
Prediction markets have the potential to influence both financial markets and public discourse. By aggregating the views of thousands of participants, these markets can provide accurate forecasts on a wide range of topics. For example, traders can use prediction markets to hedge against the risk of unexpected events, such as changes in government policy or corporate earnings surprises. At the same time, the prices in these markets can serve as a barometer of public opinion, helping policymakers and analysts understand how people are thinking about key issues. As prediction markets continue to grow, their impact on both finance and society is likely to increase.
Recent News and Industry Developments
The past few weeks have seen several important developments in the prediction market industry. Kalshi’s rise to the top of the U.S. market is a major milestone, reflecting the platform’s ability to attract liquidity and active traders. Meanwhile, Polymarket’s efforts to expand its product offerings and comply with regulations show that competition in the sector remains fierce. Other platforms, such as those focusing on sports prediction markets, are also gaining traction, as seen on sites like Polymarket’s sports section. These developments suggest that the prediction market industry is entering a new phase of growth and innovation.
Challenges and Risks Facing Prediction Markets
Despite their potential, prediction markets face several challenges and risks. Regulatory uncertainty remains a major obstacle, especially in the United States. Platforms must navigate a complex web of laws and regulations, which can change quickly and unpredictably. In addition, prediction markets are vulnerable to manipulation and insider trading, as participants may have access to information that is not available to the public. Finally, the success of these markets depends on attracting a large and diverse group of participants, which can be difficult in a crowded and competitive landscape. Addressing these challenges will be critical for the long-term success of the industry.
The Future of Prediction Markets
Looking ahead, the future of prediction markets appears bright. The success of platforms like Kalshi and Polymarket demonstrates that there is strong demand for new ways to speculate on real-world events. As more platforms obtain regulatory approval and expand their product offerings, the industry is likely to attract even more users and capital. Advances in technology, such as blockchain and smart contracts, will make it easier to create secure and transparent markets. At the same time, the growing popularity of prediction markets could lead to greater scrutiny from regulators and policymakers, who will need to balance innovation with consumer protection.
Conclusion: A New Era for Prediction Markets
In summary, the prediction market industry is undergoing rapid change, driven by rising trading volumes, new product offerings, and evolving regulatory frameworks. Kalshi’s dominance in the U.S. market and Polymarket’s focus on compliance and innovation highlight the dynamic nature of the sector. As prediction markets continue to grow, they will play an increasingly important role in both finance and public discourse. For those interested in following the latest developments, sources such as CoinDesk provide up-to-date coverage of the industry’s most important news stories. The coming years will be critical for the future of prediction markets, as platforms compete for users, navigate regulatory challenges, and shape the way we think about forecasting the future.
For more information, see the original report at [CoinDesk](https://coindesk.com/markets/2025/09/20/kalshi-outpaces-polymarket-in-prediction-market-volume-amid-surge-in-u-s-trading).
