From Politics to Profit: Prediction Markets Emerge as the Next Big Asset Class

Prediction platforms are rapidly transforming into broad, information-driven trading venues as regulatory clarity, institutional investment, and integration with traditional brokerages accelerate adoption and liquidity, according to Bernstein Research.

According the information analysts led by Gautam Chhugani said prediction markets are “evolving to be broader information markets,” with interest expanding well beyond politics and sports into economics, culture, corporate events, and financial indicators. The analysts described the emerging space as a hybrid between derivatives trading and real-time market intelligence, driven by the tokenization of data and the rise of compliant, regulated platforms.

Prediction markets allow users to trade simple yes/no contracts that pay out $1 if an event occurs and $0 if it does not, with prices reflecting the market-implied probability of an outcome.

Kalshi vs. Polymarket: The Race for Dominance

Bernstein noted that the “real battle” in the sector is now between Kalshi and Polymarket – two giants taking distinct but increasingly convergent approaches.

Kalshi adopted a regulation-first model, securing key CFTC licenses and even winning a court battle to list political contracts. It is now expanding internationally through crypto integrations with Solana and Base, broadening its reach to non-U.S. markets.

Polymarket, meanwhile, began as a decentralized platform on Polygon and quickly became the largest global venue for event-based trading. However, Kalshi recently overtook Polymarket in monthly trading volume, processing $4.4 billion in October compared to Polymarket’s $3 billion, according to The Block’s dashboard.

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With new regulatory clarity from the CFTC and SEC, Polymarket is preparing a KYC-compliant U.S. relaunch through its clearing arm QCEX, alongside plans for a POLY token.

Both firms have raised significant capital this year – Kalshi with $300 million from Sequoia Capital and Andreessen Horowitz, and Polymarket with a $2 billion investment from Intercontinental Exchange (ICE). Notably, the NHL has signed multi-year partnerships with both platforms – the first major U.S. sports league to formally engage with prediction markets.

Robinhood’s Growing Role

Bernstein highlighted Robinhood’s rapid entry as a major growth driver for the category. As the anchor partner for Kalshi, Robinhood now lists over 1,000 prediction contracts and accounts for 57% of Kalshi’s October trading volume. The brokerage reported $2.5 billion in prediction-market activity last month, up from $2.3 billion during all of Q3, suggesting a potential $300 million annualized revenue run rate if growth continues.

According to Bernstein, the sector’s evolution from “niche betting” to “information liquidity markets” is reshaping how institutions, retail traders, and even sports leagues engage with real-world data – blurring the line between speculation and signal in the digital economy.