A new report from Bank of America highlights a reshaping U.S. prediction market landscape, fueled by steady growth and ongoing legal challenges. Total weekly trading volume has seen a 4% increase, with Kalshi — a federally regulated exchange — leading the charge at a 6% rise. In contrast, Crypto.com saw marginal gains while Polymarket, which had previously experienced surges, experienced a significant 16% drop in volumes.
Currently, Kalshi holds approximately 89% of the U.S. prediction market volume, overshadowing Polymarket’s 7% and Crypto.com’s 4%, according to BofA estimates. This shift indicates a consolidation around platforms with clear regulatory backing.
The heart of this transformation lies in the debate over whether these markets should be classified as financial instruments or gambling activities. Kalshi operates under the Commodity Futures Trading Commission (CFTC) oversight, categorizing its contracts related to political and sports events as derivatives.
Polymarket, functioning on blockchain technology, has traditionally operated outside U.S. regulatory frameworks, allowing crypto-based trades on event outcomes with global liquidity but facing domestic restrictions.
Regulatory involvement is intensifying the divide. Nevada and Massachusetts have obtained preliminary injunctions against Kalshi at state levels, while New Jersey’s appeal to enforce gambling laws was unsuccessful.
Simultaneously, the CFTC has actively supported prediction markets by suing several states, arguing that federal law supersedes state gambling regulations. The agency distinguishes sports betting as entertainment and event contracts as financial instruments for risk management.
The industry’s future hinges on this legal battle. A federal victory would enable platforms like Kalshi to expand nationwide under a unified framework, while a defeat could lead to fragmented, state-by-state regulation akin to online sports betting, potentially hindering growth.
Crypto firms continue exploring their roles in the market. Polymarket remains a significant global player, especially during major events like elections when trading volumes spike. Companies such as Crypto.com and Coinbase (COIN) are experimenting with prediction market-style offerings, indicating interest from centralized exchanges. Additionally, Binance announced on Thursday its integration of a prediction markets feature into Binance Wallet.
Traditional gaming companies are also adapting. FanDuel recently scaled back parts of its fantasy sports operations, partly attributed by Bank of America to the rise of prediction markets, suggesting a user shift towards trading-like products over traditional betting.