FAQ: What you need to know about prediction markets
Investing.com -- Prediction markets are emerging as one of the most dynamic areas in online gaming and finance, according to Bank of America analysts in a note on Monday.
These platforms, described by BofA analyst Shaun Kelley as “market-based exchanges offering events futures contracts,” allow users to trade outcomes on events such as elections or sports contests.
Unlike traditional sportsbooks, prediction markets “match buyers and sellers and collect a fee per transaction like a stock exchange,” the analyst explained.
Major players include Kalshi, Polymarket, Crypto.com, ForecastEx, and PredictIt.
BofA notes that growth in the U.S. market has accelerated sharply following “a major court victory by Kalshi in October 2024 allowing election contracts,” along with the surge in political and sports-related trading activity.
The note added that the sector has benefited from “a laissez-faire regulatory approach by the current federal government and CFTC.”
Kalshi remains the dominant U.S. exchange, with total trading volume reaching $7.3 billion in the last eight weeks, compared with just $2.7 billion in the first half of 2025, according to BofA estimates.
The bank estimates that prediction markets now represent “about 3-8% of the legal online U.S. sports betting market,” but the potential market “could exceed $1 trillion, just for sports.”
However, Kelley warned that regulatory risks remain high, noting “key cases pending in New Jersey, Maryland, Nevada, and Massachusetts.”
While Kalshi has so far prevailed in several rulings, BofA said the issue “seems destined for the U.S. Supreme Court.”
If allowed to grow unchecked, BofA believes prediction markets “may bring about a broader financialization of betting,” blurring the line between gambling and financial trading.
