Growth in prediction markets is increasing as traders seek more precise ways to price and hedge discrete events, from elections to interest rate decisions, without relying on blunt proxy trades.
Prediction markets are running at an annual turnover rate of more than $3 billion, up from about $2 billion in December, and could reach $10 billion by 2030, according to a Monday report by US bank Citizens.
Citing accelerating volumes, stronger market structure and early institutional engagement, the bank said the trajectory reflects the early development of listed derivatives and digital assets.
“We continue to see ~$10 billion of annual industry revenue in 2030 as a reasonable medium-term waypoint rather than an end state,” wrote analysts led by Devin Ryan.
Prediction markets have quickly moved beyond niche betting to a growing ecosystem of sophisticated trading platforms that aggregate probabilities of real-world events. Leading players include Kalshi, a CFTC-regulated US exchange for event contracts, and Polymarket, one of the largest decentralized markets covering politics, sports and finance. These platforms are attracting significant volume and attention from both mainstream finance and regulatory bodies, reflecting broader growth and the shift towards institutional relevance.
Asset classes typically scale from retail-led liquidity to professional market makers and ultimately institutional capital, driving a step change in depth and sophistication, the analysts said, arguing that prediction markets are following that path.
Volume in January was up more than 40% from December, with February following at the same pace despite expectations of a post-football slowdown. While sports remain a key driver of liquidity, activity is expanding into macroeconomic, political and regulatory events, areas more in line with institutional demand.
Prediction markets allow investors to hedge discrete event risk, from inflation surprises to M&A approvals, without relying on proxy instruments such as index futures or options, reducing basis risk. By isolating specific outcomes, they provide targeted risk transfer and capital-weighted probability signals in real time, Citizens said.
Institutional participation will only emerge through data integration, liquidity provision, settlement standards and regulatory clarity, with direct trading expected to scale as the infrastructure matures. While today’s revenue is largely transaction-driven, the bank’s analysts see growth in data, research and financing services as the ecosystem develops.
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