Prediction markets are rapidly evolving from niche trading venues into what analysts believe could become a multi billion dollar financial asset class. A new report from Citizens estimates the industry is currently operating at an annualized revenue run rate exceeding 3 billion dollars, with a projected path toward 10 billion dollars in annual revenue by 2030 if current growth trends continue.
The acceleration in activity reflects rising demand for tools that allow traders and institutions to hedge specific event risks more precisely. Rather than relying on broad proxy instruments such as index futures or options, prediction markets enable participants to trade contracts tied directly to real world outcomes, including elections, central bank rate decisions, inflation data releases and regulatory approvals.
According to the report, industry revenue was tracking closer to 2 billion dollars annually in December before climbing sharply in early 2026. January trading volumes increased more than 40 percent compared with the previous month, while February activity remained elevated despite expectations that markets would cool after the end of major football events. Although sports contracts continue to generate meaningful liquidity, volumes are increasingly shifting toward macroeconomic and political events that align more closely with institutional hedging needs.
Platforms such as Kalshi and Polymarket have become central players in the expanding ecosystem. Kalshi operates as a regulated U.S. exchange offering event based contracts overseen by federal authorities, while Polymarket runs on decentralized infrastructure and facilitates trading across politics, economics and global affairs. Together, these venues illustrate how prediction markets are broadening beyond retail speculation into structured financial instruments attracting professional attention.
Analysts argue that the development path resembles the early evolution of listed derivatives and digital assets. Asset classes often begin with retail driven liquidity before market makers step in to provide tighter spreads and deeper order books. Over time, institutional capital typically follows once infrastructure, regulatory clarity and settlement standards mature. Citizens believes prediction markets are progressing along that same trajectory.
Institutional engagement is currently emerging through indirect channels. Banks, hedge funds and data providers are integrating prediction market pricing into research models and risk dashboards. Liquidity providers are also exploring ways to support market depth, while compliance frameworks and regulatory oversight continue to develop. Direct large scale institutional trading is expected to expand as operational safeguards strengthen.
One of the key advantages cited by analysts is the reduction of basis risk. By isolating discrete outcomes, prediction contracts allow investors to hedge specific scenarios, such as a surprise inflation print or the approval of a major merger, without exposure to broader market swings unrelated to that event. In addition to transaction driven revenue, the report highlights potential growth in data analytics, research services and financing solutions tied to event markets.
With trading volumes climbing, infrastructure improving and institutional curiosity intensifying, prediction markets are increasingly being viewed as a distinct segment of modern financial markets rather than a digital extension of traditional betting platforms.
