Prediction markets beat many polls in the 2024 US election. An analysis of Polymarket, Kalshi, regulation, and forecasting markets.
Prediction markets are one of the oldest ideas in finance. People reveal what they know by betting on an outcome. Market prices then estimate the probability of that outcome. The idea existed centuries before modern financial markets. For example, people bet on papal elections in 16th-century Rome. Irish bookmakers also offered markets on political outcomes long before economists explained why these markets could produce accurate forecasts.
Friedrich Hayek made the academic case for prediction markets in the 1940s. He argued that prices combine private information held by many people. By contrast, no central planner or polling organization can gather that information through surveys alone. In prediction markets, prices are backed by money. People have a financial incentive to be right and a financial cost for being wrong. Those with useful information bet on it. Those without it lose money. As a result, prices combine the views of participants willing to risk their own capital.
Prediction markets saw little development in the United States for much of the 20th century because gambling laws blocked event-based financial markets. That changed in 1988. The University of Iowa launched the Iowa Electronic Markets, an academic project that used real-money contracts on US presidential elections. The CFTC allowed the project to operate under a no-action letter. However, it had to stay small and focus on research. Its forecasts were accurate, yet they attracted little attention.
The Turning Point
Blockchain technology opened a new path. Smart contracts allowed prediction markets to accept cryptocurrency. They also settled payouts automatically and resolved outcomes without a central operator. As a result, prediction markets could operate at a global scale without relying on traditional financial infrastructure. Even so, the road to $21 billion in monthly trading volume was not straightforward. It included an early Ethereum project that failed, years of regulatory battles, a US presidential election, and one platform that made the model work.
This is that story.
Why Prediction Markets Work
Before looking at the history of individual platforms, it helps to understand why prediction markets often produce more accurate forecasts than polls and expert models.
A poll asks people what they think will happen. It does not penalize them for being wrong. Likewise, a pundit predicting on television faces no financial cost for an incorrect forecast. Expert models, including FiveThirtyEight’s presidential forecast, also rely on polls. At every stage of the traditional forecasting process, the people making predictions have no money at stake.
Prediction markets work differently. Participants risk their own money on the outcomes they expect. A contract pays $1 if a specific event occurs and $0 if it does not. Therefore, a contract trading at $0.60 implies a 60% probability. If you believe the true probability is higher than 60%, you buy. Otherwise, you sell. Correct forecasts earn a profit, while incorrect ones result in a loss. Over time, people who consistently understand events better than others tend to profit. Meanwhile, weaker forecasters lose money to better ones. As a result, market prices reflect the judgments of participants with a financial incentive to be accurate.
Evidence from the Iowa Electronic Markets, Intrade’s political markets, and Polymarket’s performance during the 2024 US election supports this view. Prediction markets have consistently outperformed polling averages in political forecasting. They have also identified earnings surprises earlier than analyst consensus. In some cases, they tracked pandemic outcomes more accurately than official models. However, the debate has changed. The question now is how much better prediction markets perform than other forecasting methods, and under what conditions they become less accurate.
Intrade: The Centralized Pioneer and Its Collapse (2001–2013)
2001-2013
Intrade: The Platform That Proved the Model Before Regulators Shut It Down
Intrade launched in 2001 as a centralized prediction market based in Ireland. The platform allowed users to trade contracts on political, economic, and entertainment outcomes. At its peak, Intrade’s US presidential election markets attracted high trading volume and widespread media attention. Major news organizations also cited its prices alongside poll-based forecasts.
Intrade also built a strong record for accuracy. During the 2008 and 2012 US presidential elections, its prices outperformed most major polling aggregators in the final weeks of each campaign. Economists studied its markets to understand how they combined information. At the same time, researchers relied on Intrade’s data to support the case that prediction markets could produce accurate forecasts.
However, regulators, not the market itself, ended Intrade’s run. In November 2012, the US Commodity Futures Trading Commission (CFTC) sued Intrade’s parent company. The agency alleged that the platform had offered commodity options to US customers without authorization. In response, Intrade blocked US users. Losing its largest market, followed by financial management problems, pushed the company into collapse in March 2013. Customers could not withdraw their funds for months, and many eventually recovered only pennies on the dollar.
Intrade’s collapse had two lasting consequences. First, it showed that centralized prediction markets operating outside the United States could still fall under CFTC enforcement. Location offered little protection if the platform served US users. Second, it left a gap that decentralized, crypto-based prediction markets later filled. Without a central operator, regulators no longer had a single company to pursue.
Augur: The First Decentralized Attempt (2015–2020)
2015-2020
Augur: Decentralization Without Adoption
Augur launched on Ethereum in July 2018 after three years of development. It was the first decentralized prediction market built without a central operator. As a result, regulators could not shut down the platform by targeting a single company. Users could create markets without permission. REP token holders resolved outcomes by staking their tokens, while smart contracts handled payouts automatically.
Augur proved the technology worked. It showed that decentralized prediction markets could run on Ethereum. However, it failed to attract users. By 2019, more than a year after launch, Augur had only dozens of daily active users. Trading volume remained low, and most markets saw little activity.
Several factors limited adoption. First, the user experience was difficult for people unfamiliar with crypto. Creating a market, placing a bet, and claiming winnings required multiple wallet transactions. Users also needed to understand Ethereum gas fees. Second, market resolution took too long. REP holders voted on outcomes, and disputes sometimes triggered additional staking rounds before markets settled. Finally, Ethereum’s gas fees made small bets impractical. Paying $5 in transaction fees to place a $10 bet made little economic sense.
Even so, Augur showed what decentralized prediction markets could become. The problem was not the idea. The technology and user experience were not ready for a broader audience. Later platforms built on those lessons. They chose faster and cheaper blockchains, simplified the user experience, and focused on markets with consistent demand instead of trying to cover every possible event.
Polymarket: Usability Over Decentralization (2020–Present)
June 2020
Polymarket Launches: A Different Approach to the Same Problem
Polymarket launched in June 2020. Its founder, Shayne Coplan, was 22 years old at the time. Unlike Augur, Polymarket focused on usability instead of full decentralization. The goal was to build a prediction market that ordinary users could navigate.
Polymarket chose Polygon instead of the Ethereum mainnet. As a result, transaction fees stayed low enough to support small trades. A $5 bet no longer came with a $5 gas fee. The platform also used USDC for settlement, giving users a stable currency instead of one with constant price swings. In addition, the Polymarket team reviewed new markets before listing them. That approach produced clearer resolution rules and reduced the disputes that had slowed Augur.
The platform first focused on COVID-19 questions. Users traded on vaccine timelines, US case counts, and public health restrictions. These topics attracted both uncertainty and public attention. As a result, scientists, policy analysts, and public health professionals had reasons to participate. Their activity also made the markets more informative than much of the public discussion at the time.
Even so, trading activity remained modest throughout 2020 and 2021. Monthly volume reached hundreds of thousands of dollars, not millions. Polymarket attracted interest within the crypto community but remained largely unknown elsewhere. However, the platform faced its biggest challenge in January 2022 when US regulators took action.
January 2022
The CFTC Settlement and the Path Forward
In January 2022, the US Commodity Futures Trading Commission (CFTC) settled charges against Polymarket. The agency found that the platform had offered binary options contracts to US users without registering as a designated contract market. Polymarket paid a $1.4 million civil penalty and agreed to block US users. Intrade had faced a similar outcome years earlier, but Polymarket avoided the collapse that followed.
The settlement changed Polymarket’s direction in several ways. First, it confirmed that blockchain-based prediction markets still fell under CFTC oversight when they offered financial contracts to US users. Decentralization alone did not place a platform outside US regulation. Second, Polymarket had to introduce geographic restrictions. Finally, the settlement gave the company a regulatory path to pursue a future return to the US market under a different structure.
However, the settlement did not stop Polymarket’s growth. The platform continued serving users outside the United States. Trading volume also increased throughout 2023 and into 2024 as the US presidential election drew global attention. Traders wanted exposure to one of the world’s most closely watched political events. By November 2024, Polymarket processed $3.6 billion in trading volume tied to the US presidential election. Just 34 months earlier, the platform had been settling charges with the CFTC.
November 2024
The 2024 US Election: When Prediction Markets Went Mainstream
Polymarket came to global attention during the 2024 US presidential election. More than $3.6 billion in trading volume centered on whether Donald Trump would return to the White House. The figure came from a single binary market on one election in one country. Just two years earlier, Polymarket was still unfamiliar to most people.
Trading volume drew attention, but accuracy became the main focus. In the days before the election, Polymarket gave the eventual winner an implied probability above 60%. Meanwhile, polling-based forecast models, including Nate Silver’s and ABC News/FiveThirtyEight’s, showed a closely contested race. The election result matched Polymarket’s probabilities more closely than several polling-based forecasts.
As a result, prediction markets received more media coverage than ever before. CNN, The New York Times, the BBC, and many other news organizations cited Polymarket alongside polling averages as another measure of election probabilities. Researchers also examined the platform’s forecasting performance. At the same time, critics questioned whether large traders could influence market prices. During the election, observers pointed to several concentrated positions that may have affected probability estimates. Because the blockchain is public, anyone could see those positions. However, the episode also showed how difficult it can be to interpret prices when a small number of traders control a large share of market liquidity.
The election also transformed Polymarket’s scale. Monthly trading volume increased from less than $200 million at the start of 2024 to $2.6 billion in November. November represented nearly 28% of the platform’s cumulative trading volume at the time. During the election, Polymarket became one of the world’s most closely watched information markets.
$3.6B
Polymarket trading volume on the 2024 US presidential election alone
For context, Polymarket processed less than $200 million during its first three years. The 2024 election generated more trading volume than the platform had processed during its entire earlier history. By May 2026, cumulative trading volume had reached about $9.4 billion. The election alone represented more than one-third of that total.
The Post-Election Reckoning: Volume Drops, Then Scales Again
Trading volume declined after the 2024 US presidential election. The drop exposed one of the biggest questions facing prediction markets. Volume reached $2.6 billion in November 2024 but fell by 85% after the election result was confirmed. The decline showed how closely trading activity followed major events.
Monthly trading volume fell from $2.6 billion in November 2024 to about $400 million in December. That raised an obvious question. Could prediction markets maintain high trading volumes without a US presidential election every four years? If the industry’s largest spikes depend on a single event, sustaining growth becomes more difficult between election cycles.
New Market Drivers
However, activity through 2025 and into 2026 told a different story. After mid-2025, private-market valuations for Polymarket and Kalshi increased. Leaders across the crypto industry also gave the sector more attention. At the same time, more traders returned, while interest in prediction markets continued to expand beyond the crypto community.
Broader market coverage also supported growth. Geopolitical events, especially developments in the Middle East, became major drivers of trading activity. By February 28, 2026, Polymarket recorded a new single-day trading volume record of $425 million. The figure exceeded the previous record set on Election Day 2024. Most of the activity came from Iran-related markets that resolved on the same day. For example, the market “Khamenei out as Supreme Leader of Iran by February 28” increased from $23,000 in trading volume on February 27 to $29.6 million on February 28. That was a 1,275-fold increase in one day.
The Iran market also showed what drives prediction markets. Trading activity increases when uncertainty is high. The market on whether Ayatollah Ali Khamenei would leave power attracted heavy participation because the outcome had global implications, and participants held different information and expectations. Analysts, journalists, policymakers, and other participants traded on their own assessments. As a result, the market offered a real-time view of how participants collectively assessed one of the most closely watched geopolitical events of early 2026.
$21B
Polymarket monthly volume – peak 2026
$425M
Single-day volume record – February 28, 2026
Kalshi: The Regulated Alternative (2021–Present)
Kalshi chose a different path from Polymarket. The company focused on US regulatory approval from the beginning. It spent more than a year working with the US Commodity Futures Trading Commission (CFTC) before receiving CFTC approval to operate as a designated contract market in November 2020.
Because Kalshi operates under CFTC oversight, it can serve US retail customers and promote its products across the United States. By contrast, Polymarket blocks US users because of its regulatory settlement. However, regulation also comes with trade-offs. Kalshi faces higher compliance costs and moves more slowly than platforms outside the US regulatory system. In return, it offers US users a legal way to trade event contracts through a regulated financial platform.
The first major challenge came in 2023. The CFTC rejected Kalshi’s application to list political event contracts. The agency argued that political markets could create conflicts of interest for policymakers who held positions. Kalshi challenged the decision in federal court. Then, in September 2024, the US Court of Appeals for the District of Columbia Circuit ruled in the company’s favor. The court found that the CFTC had exceeded its authority by blocking the contracts. As a result, Kalshi opened its political markets to US retail users just weeks before the 2024 presidential election. The ruling also supported the company’s long-term regulatory strategy.
Federal vs State Rules
The CFTC did not appeal the ruling. Instead, it updated its rules for event contracts. Through 2025, the agency published clearer guidance on the types of markets it would allow. Economic data contracts remained permitted. Political event contracts also stayed available after the court ruling. However, the agency continued to reject markets that conflicted with public policy, including sports betting in states where it is illegal and contracts tied to criminal outcomes.
Legal disputes also continued at the state level. Nevada gaming regulators sued Kalshi in February 2026. The Arizona Attorney General followed with a lawsuit in March 2026. Both argued that CFTC approval did not override state gambling laws. As of mid-2026, federal commodities law and state gambling laws still conflict on event contracts. That issue is one of the largest unanswered regulatory questions for US prediction markets.
Prediction Markets: On-Chain vs Regulated (2025-2026)
By 2026, prediction markets followed two different models. The difference came from regulation, not technology.
On-chain platforms such as Polymarket settle trades in USDC on Polygon. Meanwhile, regulated platforms such as Kalshi settle trades in US dollars through the US banking system. Between the 2024 election and May 2026, on-chain prediction markets also changed. They no longer served only crypto users. Instead, they competed for the same retail and proprietary trading activity as Kalshi and ForecastEx.
Polymarket Returns to the US
Polymarket also moved closer to the US regulatory system. The company began a phased US rollout through a regulated intermediary in late 2025. Then, in March 2026, it self-certified new market rules with the CFTC for its US venue. This was the first time an on-chain prediction market operated within the US regulatory system. Four years earlier, Polymarket had been forced to block US users. By 2026, it operated a CFTC-certified US venue under the Commodity Exchange Act. Kalshi entered the US market through the courts. Polymarket entered through compliance.
ForecastEx, launched by Interactive Brokers, introduced another regulated platform. It brought prediction markets to the firm’s existing brokerage clients and institutional trading infrastructure. As a result, prediction markets became available through both crypto-native platforms and traditional financial institutions.
How Prediction Markets Work
A prediction market contract pays $1 if a specific outcome occurs and $0 if it does not. A contract trading at $0.65 implies a 65% probability for that outcome.
On Polymarket, every market has two tokens: YES and NO. A trader who expects Donald Trump to win the election can buy YES tokens at $0.65. Each token pays $1 if Trump wins, producing a profit of $0.35. A loss, however, means the token expires worthless, and the trader loses the $0.65 purchase price. Meanwhile, traders who bought NO tokens at $0.35 receive $1 if Trump loses and $0 if he wins.
Prices adjust whenever new information reaches the market. For example, a poll showing Trump ahead may increase demand for YES tokens and push the price higher. By contrast, negative news may increase demand for NO tokens and push the price lower. As a result, market prices update continuously instead of waiting for the next poll.
Polymarket settles markets through UMA Protocol (Universal Market Access). After an event ends, UMA verifies the outcome before smart contracts distribute payouts automatically. If participants dispute the result, UMA token holders stake their tokens on the outcome they believe is correct. Those who vote correctly receive rewards; others lose part of their stake.
The Accuracy Debate: What Prediction Markets Get Right and Wrong
The 2024 US presidential election provided the biggest test of prediction markets so far. The results supported the case for prediction markets, but they also showed that the story is more complex than the popular claim that “prediction markets beat the polls.”
In the final weeks before the election, Polymarket gave Donald Trump a higher probability of winning than many polling-based forecast models. That outcome deserves attention. However, better forecasting was not the only factor. Political prediction markets attract users who are disproportionately male, financially experienced, and politically right-leaning. That mix may have pushed Trump’s market probability higher, independent of any information advantage.
Large traders added another complication. A small number of wallets pushed Trump’s probability above the level suggested by normal trading activity. Because Polymarket operates on a public blockchain, anyone could examine those positions. That prompted questions about whether prices came from new information or deliberate attempts to influence the market.
Chaos Labs, a crypto risk management firm, estimated that wash trading made up as much as one-third of Polymarket’s trading during the 2024 US presidential campaign. If that estimate is correct, part of the reported trading volume came from trades that increased activity without adding new information. In that case, the market’s forecasting performance may have depended partly on legitimate trades ending close to the correct probability, not on trading volume alone.
Even so, the broader evidence still supports prediction markets. The Iowa Electronic Markets, Intrade, and Polymarket have all shown that well-functioning markets can produce reliable probability estimates across many types of events. At the same time, the 2024 election also showed that market quality depends on who participates and how they trade. High-profile markets attract informed traders, but they also attract participants whose goals extend beyond making a profit.
What Prediction Markets Are Becoming
By mid-2026, prediction markets covered far more than political elections. Activity spread across geopolitics, macroeconomics, sports, climate, and technology. Each category attracted participants with different knowledge and different reasons to trade.
Geopolitical markets became one of the largest sources of trading activity outside election cycles. Polymarket’s Middle East markets led that change. Traders bought and sold contracts on diplomatic developments, military actions, leadership changes, and government policy. Participants included analysts, journalists, former government officials, and others with relevant expertise who were willing to back their views with money. In several cases, these markets moved ahead of official government assessments.
Macroeconomic markets also attracted more institutional participants. Contracts on Federal Reserve interest rate decisions, GDP growth, inflation, and employment data appealed to proprietary trading firms, hedge funds, and macro investors. These firms used prediction markets alongside traditional financial derivatives to express their views on economic events. As institutional participation increased, trading volume grew, liquidity improved, and market prices incorporated a wider range of information.
AI and technology markets also attracted more participants. Traders bought contracts on AI capabilities, technology company developments, and scientific milestones. Many participants worked in AI research or the technology industry, giving them information that was not yet widely available. Prediction markets gave them a way to express those views through trading. In several cases, AI-related markets pointed to likely developments before public announcements.
As discussed in our DePIN research, blockchain infrastructure and real-world data continue to work together across several crypto applications. Prediction markets are one example. They use financial incentives to turn individual judgments into on-chain probability estimates that anyone can access.
The Regulatory Path Forward
As covered in our crypto regulation research, the 2025-2026 period has been one of the busiest for US crypto regulation. The GENIUS Act, SEC-CFTC joint guidance, and new rules for prediction markets all moved forward during this period. The regulatory environment also changed from 2022, when Polymarket had to block US users.
The CFTC has introduced guidance that defines which event contracts it allows and which it does not. That gives Polymarket and Kalshi a more predictable regulatory path than the enforcement-first approach of previous years. In March 2026, Polymarket also self-certified the rules for its US venue. It became the first crypto-native prediction market to operate within the US regulatory system.
The biggest legal issue is now at the state level. Nevada and Arizona argue that state gambling laws still apply to event contracts, even when the CFTC permits them under federal law. That creates a conflict between federal commodities regulation and state gambling laws. The outcome will influence how prediction markets operate across the United States. It will also answer a broader question: should prediction markets be regulated as financial products or as gambling?
What I’m Watching
Prediction markets spent decades trying to become part of the financial system. Then growth accelerated within about 18 months. Monthly trading volume increased from less than $200 million in early 2024 to $21 billion by early 2026. The 2024 US presidential election played an important role. Lower-cost blockchains, stablecoin settlement, better oracle systems, and a user experience that more people could use also contributed.
The metric I watch most closely is the share of trading volume coming from geopolitical and macroeconomic markets compared with political elections. If prediction markets depend mainly on US presidential elections, they are still a niche product with occasional spikes in activity. However, if geopolitics, macroeconomics, and technology attract trading between elections, prediction markets become useful throughout the year.
The second area I watch is institutional participation. Prediction markets tend to improve as more informed participants enter the market. Analysts, researchers, and domain experts usually contribute better information than traders following short-term narratives. As institutional participation grows, market prices should also become more reliable.
The third area is the UMA oracle system. Prediction markets depend on accurate market resolution. UMA has handled most markets successfully, but disputed outcomes are still one of the industry’s biggest risks. An incorrect payout in a high-profile market would damage confidence in the entire sector. Future growth depends on accurate and consistent market resolution.
The Long View
People bet on papal elections in 16th-century Rome. The Iowa Electronic Markets introduced modern academic prediction markets in 1988. Intrade built a global prediction market before regulators forced it to leave the United States. Augur proved decentralized prediction markets could work, but it failed to attract users. Polymarket built a platform that processed $3.6 billion on a single market and later reached $21 billion in monthly trading volume.
The idea has changed very little over the centuries. People still use money to express their expectations about future events. What changed is the technology, the regulation, and the number of people who can participate. The years ahead will show whether prediction markets become a permanent part of the financial system.
Key Takeaways
Prediction markets use financial incentives to convert individual judgments into probability estimates. Traders who believe a contract is mispriced can profit by buying or selling it. Research and historical evidence show that well-functioning prediction markets outperform polls and expert forecasts across many types of events.
Intrade showed that prediction markets could work at scale. The platform operated between 2001 and 2013 before a CFTC enforcement action led to its collapse. The lesson was that centralized prediction markets are exposed to regulatory action, regardless of where they operate. Augur later proved decentralized prediction markets could run on Ethereum, but high fees and a difficult user experience limited adoption.
Polymarket focused on usability. The platform launched in June 2020 on Polygon, used USDC for settlement, and introduced curated markets with defined resolution rules. A CFTC settlement in January 2022 forced Polymarket to block US users. Even so, the platform continued serving international users and processed $3.6 billion in trading volume during the 2024 US presidential election.
Furthermore
The 2024 election brought prediction markets into public discussion. Polymarket gave Donald Trump a higher probability of winning than many polling-based forecast models in the final weeks before the election. After the result, major news organizations began citing prediction market prices alongside polls as another measure of election probabilities.
Prediction markets now cover far more than elections. By early 2026, monthly trading volume had reached $21 billion. Geopolitics, macroeconomics, and technology became important sources of trading activity between election cycles. On February 28, 2026, Iran-related markets helped push single-day trading volume to a record $425 million.
Regulation is still developing. Kalshi won a federal court ruling allowing political event contracts in September 2024. Polymarket self-certified the rules for its US venue with the CFTC in March 2026. The remaining legal question concerns the relationship between federal CFTC oversight and state gambling laws. The answer will influence how prediction markets operate in the United States.
Sources & Further Reading
- How Prediction Markets Scaled to $21B in Monthly Volume in 2026 — TRM Labs
- Prediction Markets in 2026: Key Trends Reshaping Forecasting, Trading, and Regulation — MetaMask
- Crypto Prediction Markets 2026: 5 Platforms, $9.4B Tested — Tech Insider
- The Anatomy of a Blockchain Prediction Market: Polymarket in the 2024 US Presidential Election — arXiv
- What Is Polymarket and How to Trade on the Decentralized Prediction Market? — BingX
- What Are Decentralized Prediction Markets? — CoinShares
- The Prediction Market Playbook: Uncovering Alpha, Top Players, Core Risks — KuCoin
- How Does Polymarket’s US Election Crypto Prediction Market Work? — CryptoSlate
- Polymarket — Decentralized Prediction Market
- Kalshi — CFTC-Regulated Event Contract Market
- Augur — Decentralized Prediction Protocol