A decade in the making, the prediction track is ready—who will be the next main character to take the stage?

The evolution of crypto prediction markets is quite interesting, as it was once considered a “disproven” track. It took ten years to achieve PMF (Product-Market Fit), and its evolution exceeded market expectations. Sometimes, in the crypto space, it’s not always appropriate to draw conclusions too early.

The concept of prediction markets itself is not new; it has existed in the crypto field for a long time. In 2015, the Gnosis project began development; in 2018, Augur officially launched. It is a decentralized prediction market platform based on Ethereum, allowing users to create and predict future events and settle using cryptocurrency.

In 2020, Polymarket (based on Polygon) was also launched, but it remained marginalized. Coupled with regulatory factors, it struggled to operate. In its early days, Polymarket’s monthly trading volume was only a few million dollars; Augur’s TVL plummeted by nearly 80% after the 2020 election, dropping from its peak to just a few million dollars. The overall industry TVL hovered around $7 million at its peak, with monthly trading volumes below $100 million. Regulatory pressure (such as the CFTC viewing it as “gambling”) and imperfect oracles (prone to manipulation) further suppressed growth.

The real explosion of the entire prediction market only began in 2024. Especially, the 2024 US presidential election became a turning point. Polymarket’s election prediction market trading volume exceeded $2.7 billion, and the platform’s monthly trading volume soared from $62 million in May to $2.1 billion in October, an increase of more than 30 times. The annual nominal trading volume reached $16.3 billion, far surpassing the previous total.

Why did it take ten years to achieve PMF?

First, there were technical and user experience barriers in the early crypto space. The concept of prediction markets was great and seemed to have huge demand, but when it came to user experience, it excluded almost all users. For example, early Augur was built on Ethereum L1, with extremely high transaction costs—GAS fees were terrifyingly high, and confirmation speeds were slow. For ordinary users, they also had to master wallets and complex interfaces, all of which had a steep learning curve. These high barriers resulted in insufficient liquidity and concerns about manipulation.

Second, regulatory pressure has always existed. The US CFTC (Commodity Futures Trading Commission) classified prediction markets as “gambling” or derivatives and tightened scrutiny after 2018. During this period, Augur was fined for betting on sensitive events; Polymarket paid a $1.4 million fine in 2022 and exited the US market. Even its founder, Shayne Coplan (born in 1998), had his New York apartment raided by the FBI, with his electronic devices confiscated (though he was not arrested). Regulatory ambiguity prevented institutional funds from entering. Regulatory pressure made it difficult for liquidity to rise.

Third, changes in market narratives. From 2016 to 2018, most crypto users focused more on speculation than practical tools; from 2020 to 2023, the DeFi/NFT boom distracted attention, and prediction market TVL was only $7 million. Without mainstream event drivers, it was hard to accumulate liquidity.

Fourth, oracles were immature and easily manipulated.

But 2024 was a turning point, and as mentioned above, the 2024 US election was a catalyst, but it was far from the only one.

From 2024 to now, prediction markets have truly taken off. In addition to Polymarket, centralized prediction platform Kalshi has also emerged. In 2025, prediction market trading volume reached $27.9 billion (a 210% year-on-year increase), with a weekly peak of $2.3 billion. The combined TVL of Polymarket and Kalshi exceeded $20 billion. Both are valued at over $10 billion. Prediction markets have suddenly become the market’s hot commodity.

So, what are the driving factors?

Contrary to the obstacles encountered between 2015 and 2024, these barriers have been removed one by one, resulting in qualitative improvements in user experience and other aspects.

First, changes in technical barriers/user experience. Polygon and Base L2 networks have reduced gas fees to just a few cents, and transaction speeds have increased tenfold. Platforms like Polymarket have optimized their UI, supporting one-click stablecoin betting and attracting non-crypto natives. In addition, DeFi has developed greatly, providing deep liquidity. For users, participating in prediction markets has become very convenient. Kalshi, as a centralized prediction platform, integrates with Robinhood and others, making user participation even easier.

Second, regulatory changes. After the 2024 US election, regulation promoted crypto-friendly policies. In 2025, the CFTC approved regulated platforms like Kalshi. The SEC/CFTC clarified the legality of “spot commodity crypto,” and stablecoin legislation passed Congress. Overseas, although Switzerland has a blacklist, the overall environment has shifted from hostile to supportive, and institutional funds have poured in (such as ICE investing $2 billion).

Third, changes in market narratives. In this cycle, there is no particularly strong narrative. Real utility has become the market’s focus. Coupled with the catalytic effect of the 2024 election predictions, Polymarket has expanded into sports, economics, technology, and other fields, with media promotion (such as reports from CNN/Bloomberg) and social network dissemination fueling the prediction market boom.

Fourth, both institutions and the community are driving growth. a16z is actively involved, introducing the concept of “event-driven financial infrastructure” in the narrative, and community users are also actively participating, pushing up TVL.

Fifth, prediction markets have gradually evolved from “gambling” into a new type of signal, similar to providing real-time probability signals.

From the ten-year evolution of prediction markets, there is an interesting conclusion: not all “disproven” tracks necessarily lack PMF; sometimes it’s just that the conditions aren’t mature yet. In the crypto space, this phenomenon is particularly evident. Due to the underdeveloped infrastructure in the first ten years (expensive/slow/poor user experience, etc.), many attempts could not reach ordinary users smoothly. Perhaps in the future, Crypto Game/social/ai agent/depin/digital identity, etc.—some of these tracks may have ended, but some may still have the opportunity to prove themselves again.