Prediction Markets Gain Ground as Regulatory Battles and Competition Reshape the Industry

Prediction markets in the United States are experiencing steady growth, but legal disputes and intensifying competition are beginning to transform how the sector operates, according to a recent Bank of America report.

Weekly trading volume climbed 4% week-over-week, with federally regulated exchange Kalshi leading the charge at 6% growth. Crypto.com recorded a modest uptick, while Polymarket — which had dominated earlier weeks — saw volumes drop 16%. Kalshi now commands roughly 89% of measured U.S. prediction market volume, dwarfing Polymarket at 7% and Crypto.com at 4%, signaling a market that is consolidating around platforms with stronger regulatory footing.

The central debate driving this shift is whether prediction markets constitute financial instruments or gambling products. Kalshi operates under Commodity Futures Trading Commission (CFTC) oversight, classifying its contracts — including those tied to political and sports outcomes — as derivatives. Polymarket, by contrast, functions on blockchain infrastructure and has largely operated outside U.S. regulatory boundaries, appealing to global users but facing domestic restrictions.

Regulatory pressure is mounting on multiple fronts. Nevada and Massachusetts have both obtained preliminary injunctions against Kalshi at the state level, while New Jersey lost an appeal that curtailed its ability to enforce gambling regulations against the platform. The CFTC has taken an assertive stance, suing several states and arguing that federal law supersedes state gambling rules. Agency leadership has further distinguished event contracts — viewed as financial hedging tools — from traditional sports betting, which it categorizes as entertainment.

The outcome of this regulatory standoff carries major implications. A federal victory could allow platforms like Kalshi to scale under a unified national framework, while a loss may fragment the market into a state-by-state model resembling online sports betting.

Meanwhile, major crypto players including Coinbase and Crypto.com are piloting prediction market products. Binance recently launched a prediction markets feature through Binance Wallet, underscoring growing institutional interest. Even traditional gaming operators are taking notice — FanDuel's recent rollback of certain fantasy sports offerings may reflect users migrating toward trading-style platforms.