Everyone is Wrong About Prediction Markets

Join 5000+ Leaders in Web3 & Sports from brands like FIFA, NBA, Premier League, NHL, reading Sporting Crypto every week 👇️ 

Thanks so much to everyone who attended Sports Blockchain Summit London last week! It was a fantastic turnout, and we’re excited to do it again soon.

Next stop for me is Miami, where I’m hosting a Sporting Crypto Dinner on the November 19th. If you’re keen on joining, please do reply to this email 🙂 

Prediction Markets 📊 

It’s been the year of prediction markets.

A new product that has seen so much debate and little nuanced analysis in terms of what is actually happening here.

There seem to be many people at the ‘This is the Future of Financial Markets’ spectrum, and many at the ‘This is Democratizing Gambling Addiction’ spectrum.

The thing is, everyone is right and wrong, simultaneously.

I’ll get into why soon, but firstly, the adage of ‘History doesn’t repeat but often rhymes’ is true of prediction markets.

As Simon Taylor in Fintech Brainfood puts it: Corollary: 19th-century America was both fascinated and appalled by futures contract trading, with many considering it tantamount to gambling. Yet today, it is widely considered to be a cornerstone of our global trade. Prediction, too, is off to a controversial start.

This began with the 2024 U.S. Presidential Elections, which saw prediction markets become mainstream. Polymarket, for example, was regularly cited in mainstream publications and proved more accurate than polling and the media. To boot, volumes for this election cycle exploded.

And as the graph shows, the following months saw a lull in activity. Many asked, “What’s next?”

The last 3 months, or indeed the last 6 months, have answered that.

Sports Dominance 🏀 

The next ‘product market fit’ moment for prediction markets has been sports, and has actually overtaken politics dramatically in terms of volume.

Super Bowl 2025 was the first indicator of what was to come, with billions of dollars in trade volume on Polymarket for the event in February.

March Madness then came in… of course, March 2025, which then exploded volumes on Kalshi.

August and October 2025 then saw the European Football and American Football seasons kick off, respectively, compounding momentum for sports wagers on prediction markets.

In fact, 80% of Kalshi’s volumes since March 2025 can be attributed to sports.

Which is pretty crazy.

This has led to the likes of Robinhood, for example, who use Kalshi as the backend driver of their embedded prediction market product, have seen $500m-$600m in annualized revenue since they launched in Q1 2025, as per their latest earnings call.

Speaking of which, DraftKings, one of the dominant sportsbooks in the U.S., acquired Railbird Exchange for $250m, a federally licensed prediction markets platform.

FanDue, the other dominant betting platform in the U.S., have partnered with none other than CME to launch prediction markets.

And ICE, yes, the Intercontinental Exchange that owns the NYSE, took a $2bn stake in Polymarket earlier this year.

So whilst sports is making the headlines right now, the story of prediction markets is so much bigger.

Why Everyone is Wrong 😅 

Firstly, let’s discuss the elephant in the room.

Prediction Markets have found product-market fit outside of politics, and it’s in sports.

This has prompted the question: Is this gambling?

The answer is yes, and no, but really, this is a U.S.-centric problem.

The reason for that is the U.S. regulates sports gambling and lotteries on a state-by-state basis, and prediction markets are regulated by the CFTC, because they are ‘event swaps’. They are peer-to-peer, and you need someone on the other side of your wager.

At the end of the day, whether a centralised sportsbook or peer-to-peer exchange, a user is getting a payout based on wagering on the outcome of an event. Do the mechanics of how that outcome is paid out matter?

That’s a question for the CFTC and state-based regulators.

And whether there needs to be a new sub-category, or whatever the argument is, the sports wagering piece is muddying the water.

Because prediction markets are much bigger than just sports events.

Sports are a red herring here, or the canary in the coalmine, and I’ll explain why.

And it all centres around accuracy.

Polymarket is deadly accurate.

As per this tweet, it is 95.2% accurate right now, with media ever being as accurate.

And while this may not seem like a huge deal from the outset, it most definitely is, and shows the TAM for prediction markets to be absolutely huge.

As per Simon Taylor again:

In the post-truth, AI-generated slop era, truth-seeking markets tell us things the AI can’t. And over time, that will come to define the next era of finance and society.

And that is the first critical piece.

In an era where AI-generated media is prevalent, we’re struggling to contain the ever-growing trend of ‘fake news’ being amplified by social media. So accuracy, and ‘truth’ is important in a world that is currently vulnerable to this.

Extrapolate this to financial markets; right now, analysts are predicting earnings calls.

In a future where anyone can contribute to the probability of earnings calls being within a specific range, that propels economic activity.

If Bloomberg, Morningstar and others have built incredible research products giving insights to their paying customers.

They take their customers on a journey from A-Z with insights to help them find the answer or probability of something that will impact their business.

With prediction markets, we now have a mechanism to get to ‘Z’, aka the probability of the event that will impact your business, which is incredibly valuable. This isn’t a like-for-like replacement for research firms, of course, but I think this will be disruptive.

And market research might be next.

Myriad Markets just launched ‘Perpetual Sentiment Markets’.

These are markets that ‘never resolve’ — and are a ‘new form of information infrastructure’. There is huge value in polling consumer sentiment, and this could be a digital form of that.

Of course, it’s early, but going ‘direct-to-consumer’ here can create a way to commoditize human opinion.

With it being early, we of course have teething issues - that have got some people more excited about specific markets than they maybe should be.

Those who crow: ‘everything will be financialized’ took a big hit when, recently, Coinbase CEO Brian Armstrong mentioned every word that he hadn’t already mentioned in an earnings call, resolving many prediction markets focused on this as yes, rather than no.

Many cried ‘insider trading’ but looking at these markets, they were very small. In the 10s of thousands of dollars.

Armstrong saw this as a joke, and my belief is that this was the case.

But it also showed that… not everything will be a market.

For a proper market, you need participants taking either side, and market makers willing to make these markets.

But why would participants be willing to take the other side of the market when the market is deemed a joke by the person who decides the outcome? There is no jeopardy. There is no value in the information. This is the ‘memestock-ification’ of prediction markets. They will never mature, nor be mainstream.

We have likewise seen Kalshi launch parlays, or accumulators, this side of the pond, for their customers. But these multi-leg wagers are built by, and designed for, centralized sports books. You need someone willing to be on the other end of every leg to guarantee a payout.

This will, in my opinion, be incredibly difficult to mirror in peer-to-peer markets. There will be some things that are just much more difficult to replicate than what a sportsbook offers.

But beyond all of this, the teething issues and the exciting future of prediction markets: the TAM is more than sports, it’s everything.

Regulation will mature to find a way to make these markets mature and a big part of our economy.

The commoditization of information, research and probabilities via prediction markets is fascinating, and will have a huge impact on every industry.

More Sports & Web3 Stories

• Ruben Dias becomes OKX Ambassador (Read more here)

• Australian Rugby team The Dolphins partner with ZKP (Read more here)

• MoonPay Brings Seamless Payments to Football.Fun (Read more here)

• Mythos launches first L3 on World Chain, also adopting anti-bot World ID (Read more here)

• MyPrize Becomes the First Social Gaming Business to Offer Prediction Markets in Partnership with Crypto[dot]com (Read more here)

• ONE Championship and Animoca Debut Blockchain Game (Read more here)

• International rugby player charged over alleged £70,000 crypto theft (Read more here)

• Judge Orders Crypto[dot]com to Halt Nevada Sports Prediction Markets Amid Legal Battle (Read more here)

General ‘Stuff’ that Could Impact You

• Will Robinhood Start a Bitcoin Treasury? (Read more here)

• Improbable has announced its financial results for 2024 (Read more here)

• Yuga Labs’ Otherside officially opens its doors on 12th November (Read more here)

Thanks for reading the latest edition of the Sporting Crypto newsletter!

If you enjoyed this, please tell your friends who might be interested and share it on socials.

Disclaimers

This newsletter is for informational purposes only and is not financial, business or legal advice. These are the author’s thoughts & opinions and do not represent the opinions of any other person, business, entity or sponsor. Any companies or projects mentioned are for illustrative purposes unless specified.

The contents of this newsletter should not be used in any public or private domain without the express permission of the author.

The contents of this newsletter should not be used for any commercial activity, for example - research report, consultancy activity, or paywalled article without the express permission of the author.

Please note, the services and products advertised by our sponsors (by use of terminology such as but not limited to; supported by, sponsored by or brought to you by) in this newsletter carry inherent risks and should not be regarded as completely safe or risk-free. Third-party entities provide these services and products, and we do not control, endorse, or guarantee the accuracy, efficacy, or safety of their offerings.

It's crucial to provide our readers with clear information regarding the inherent nature of services and products that might be covered in this newsletter, including those advertised by our sponsors from time to time. When you buy cryptoassets (including NFTs) your capital is at risk. Risks associated with cryptoassets include price volatility, loss of capital (the value of your cryptoassets could drop to zero), complexity, lack of regulation and lack of protection. Most service providers operating in the cryptoasset industry do not currently operate in a regulated industry. Therefore, please be aware that when you buy cryptoassets, you are not protected under financial compensation schemes and protections typically afforded to investors when dealing with regulated and authorised entities to operate as financial services firm.