Prediction markets: a decade in the making—who will be next?

The evolution of crypto prediction markets is very interesting because it was once considered a “disproven” track. It took ten years to achieve PMF (Product-Market Fit), and its evolution exceeded the market’s expectations. Sometimes, in the crypto space, it’s not always appropriate to draw conclusions too early.

The concept of prediction markets itself isn’t new—it’s existed in crypto for a long time. In 2015, the Gnosis project began development; in 2018, Augur officially launched as a decentralized prediction market platform on Ethereum, allowing users to create and bet on future events and settle using cryptocurrency.

In 2020, Polymarket (built on Polygon) launched as well, but it remained marginalized. Combined with regulatory factors, it struggled to gain traction. In its early days, Polymarket’s monthly trading volume was only a few million dollars; Augur’s TVL plummeted nearly 80% after the 2020 election, dropping from its peak to just a few million dollars. The industry’s peak TVL hovered around $7 million, with monthly trading volumes under $100 million. Regulatory pressure (such as the CFTC categorizing it as “gambling”) and flawed oracles (prone to manipulation) further stifled growth.

The true explosion of prediction markets only began in 2024. In particular, the 2024 US presidential election became a turning point. Polymarket’s election prediction markets saw trading volumes exceed $2.7 billion, and the platform’s monthly trading volume surged from $62 million in May to $2.1 billion in October—a more than 30x increase. The annual nominal trading volume reached $16.3 billion, far surpassing all previous totals.

Why did it take ten years to achieve PMF?

First, in the early days, the crypto space faced technical and user experience barriers. The prediction market concept was appealing and seemed to have strong demand, but when it came to actual user experience, it excluded almost all users. For example, early Augur was built on Ethereum L1, with extremely high transaction costs—gas fees were sky-high, and confirmation was slow. For regular users, they also had to master wallets and complex interfaces, all of which had a steep learning curve. These high barriers resulted in poor liquidity and concerns over manipulation.

Second, regulatory pressure was ever-present. The US CFTC (Commodity Futures Trading Commission) classified prediction markets as “gambling” or derivatives and tightened scrutiny after 2018. During this time, Augur was fined for betting on sensitive events; Polymarket paid a $1.4 million fine in 2022 and exited the US, and its founder Shayne Coplan (born in 1998) had his apartment in New York raided by the FBI, with his electronics seized (but was not arrested). Regulatory ambiguities kept institutional funds out, and regulatory pressure made it difficult for liquidity to grow.

Third, changes in market narrative. In the 2016-2018 crypto era, most users were more focused on speculation than practical tools; the DeFi/NFT boom from 2020-2023 distracted attention, and total prediction market TVL was only $7 million. The lack of mainstream event drivers made it hard to build liquidity.

Fourth, oracles were immature and prone to manipulation.

But 2024 was a turning point. As mentioned, the 2024 US election was a catalyst, but it was far from the only factor.

From 2024 onward, prediction markets truly took off. Besides Polymarket, centralized prediction platform Kalshi also emerged. In 2025, prediction market trading volume reached $27.9 billion (a 210% year-on-year increase), with a weekly peak of $2.3 billion; combined TVL for Polymarket and Kalshi surpassed $20 billion. Both reached valuations in the tens of billions. Prediction markets suddenly became market darlings.

So, what were the driving factors?

Contrary to the obstacles faced from 2015-2024, these barriers were systematically removed, resulting in qualitative improvements in user experience and other areas.

First, technological barriers and user experience changed. Polygon and Base L2 networks reduced gas fees to just a few cents, and transaction speeds increased tenfold. Platforms like Polymarket optimized their UI, supported one-click stablecoin betting, and attracted non-crypto natives. Additionally, DeFi developed significantly, providing deep liquidity. For users, it’s now very convenient to participate in prediction markets. Kalshi, as a centralized platform, integrated with Robinhood and others, making participation even easier.

Second, regulatory changes. After the 2024 US election, regulators promoted crypto-friendly policies. In 2025, the CFTC approved regulated platforms like Kalshi. The SEC and CFTC clarified that “spot commodity crypto” is legal, and stablecoin legislation passed Congress. Overseas, despite Switzerland’s blacklist, the overall environment shifted from hostile to supportive, and institutional funds poured in (e.g., ICE invested $2 billion).

Third, shifts in market narrative. This cycle lacked a particularly dominant narrative, so real utility became the market’s focus. Coupled with the catalyst of the 2024 election predictions, Polymarket expanded into sports, economics, tech, and other areas, aided by media coverage (e.g., CNN/Bloomberg), and social media buzz further fueled the prediction market boom.

Fourth, both institutions and the community are driving adoption. a16z is actively involved, promoting the concept of “event-driven financial infrastructure,” and community users are enthusiastic participants, pushing TVL higher.

Fifth, prediction markets are gradually evolving from “gambling” into a new type of signal provider, similar to offering real-time probability signals.

From the ten-year evolution of prediction markets, an interesting conclusion emerges: not every “disproven” track actually lacks PMF—sometimes, the conditions just aren’t mature yet. In crypto, this is especially obvious. Because the foundational infrastructure over the first ten years was incomplete (expensive, slow, poor user experience, etc.), many attempts failed to reach regular users. Perhaps in the future, Crypto Games, social, AI agents, DePIN, digital identity, etc.—some of these tracks may be over, but others may still have a chance to shine again.