Prediction Market Volumes Will Hit $1 Trillion by 2030 as Sports Betting Moderates: Bernstein

In brief

• Bernstein analysts wrote in a Tuesday note that prediction-market volumes will reach $1 trillion by the end of the decade.
• They argued that institutional investors will adopt prediction markets as a way to manage risk associated with policy and political events.
• Currently, Polymarket and Kalshi’s platforms are dominated by sports, which respectively account for 42% and 78% of trading volumes.

Prediction markets are becoming an increasingly popular way for people to speculate on sports, but those wagers won’t drive platforms’ trading volumes to $1 trillion by the end of the decade on their own, analysts at investment bank Bernstein wrote in a note on Tuesday. Today, event contracts tied to sports account for 62% of trading volumes for firms like Polymarket and Kalshi, but their share will likely moderate to 31% by 2030 as institutions become familiar with wagering on other types of events, the analysts posited. “We expect an institutional market to develop around economics, business, and political contracts, as investors seek more direct and discrete exposure to events,” they wrote, adding that corporations and insurance firms will likely adopt prediction markets as a way to hedge risk.

Bernstein analysts noted that professionals already have access to a variety of derivatives, such as interest-rate derivatives and credit default swaps, to manage policy and political outcomes. However, the analysts described those tools as a way to only gain indirect exposure.  Event contracts eliminate the risk that a given policy outcome doesn’t match the performance of a hedging instrument, the analysts wrote, adding that prediction markets also broaden access to instruments that “were previously restricted to a narrow segment of the market.” In terms of revenue, Bernstein analysts foresee prediction markets generating around $10.8 billion by the end of the decade, a more than 2,000% increase from $500 million in 2025. Meanwhile, Polymarket began charging users fees on certain markets only in April.

Trading volumes on Polymarket and Kalshi show a different picture when it comes to sports: 42% of Polymarket’s trading volumes fall under that umbrella, compared to 78% for Kalshi, according to a Dune dashboard. Sports remains the leading category for both. In fact, Kalshi facilitated $2.7 billion worth of wagers on sports last week, setting a record amid the Masters Tournament, one of professional golf’s four major championships. In recent months, Wall Street giants have already aligned themselves with the burgeoning market that gained mainstream recognition during the 2024 presidential election. Meanwhile, some states have tried to restrict prediction-market access, classifying it as a form of gambling, prompting pushback from the CFTC as it aims to regular event contracts on a federal level. This year, Tradeweb, which manages $2.8 trillion in average daily trading volumes, unveiled a strategic partnership with Kalshi. Last month, New York Stock Exchange owner ICE invested $1.6 billion in Polymarket with the intention of providing distribution. In exchange for providing liquidity on Polymarket and Kalshi’s platforms, Jump Trading, a high-frequency trading firm, gained small stakes in each company, _per _Bloomberg. Bernstein analysts noted that Susquehanna International Group has also begun applying techniques, including mispricing detection and cross-platform arbitrage, to prediction markets. Bernstein signaled that the presence of those firms is significant: For a market once dismissed as a playground for internet hobbyists, the entry of firms like Susquehanna and Jump suggests that prediction markets are on their way to graduating to the big leagues of high finance.