Abstract: Prediction markets are not new—and now they are finally decentralized. Humans have been investing in predictions since ancient times, but cryptography transforms this age-old practice into a permissionless, transparent global market. In these markets, prices reflect real-time collective wisdom, not just opinion polls. Infrastructure and regulation are driving the market forward. The clear regulatory stance of the U.S. Commodity Futures Trading Commission (CFTC), collaborations in traditional finance (TradFi), and multi-chain scalability have propelled prediction markets from niche experiments to a sector with $3.9 billion in weekly trading volume. These platforms are being directly embedded in brokerage firms, media, and consumer applications. Uncertainty is becoming a new financial asset class. As prediction markets evolve into core hedging, data, and prediction infrastructure, platforms that combine liquidity, credibility, and coverage to "price" real-world outcomes globally will continue to accumulate value. For millennia, humanity has been exploring ways to use collective wisdom to predict the future. The ancient Greeks received tokens and channeled them through a system to vote; juries at the time chose solid or perforated stones to express their opinions. In the ancient taverns of that era, private betting must have been quite common. In 17th-century Amsterdam stock exchanges, merchants would bet on the arrival times of cargo ships; in 19th-century America, political betting dominated during elections until it was banned in the 1940s. Furthermore, commodity futures trading on the Chicago Mercantile Exchange falls into this category. Clearly, humanity has long understood that investing money to predict outcomes generates highly valuable information signals. Today, prediction markets driven by crypto technology are a digital rebirth of this ancient practice—but there is a key difference: the former is permissionless, transparent, open, and globally accessible. The Information Market Revolution: What Makes Crypto Prediction Markets Different? Traditional prediction markets require trusted intermediaries to hold funds, verify results, and distribute rewards, while crypto technology, through blockchain, eliminates these intermediaries. When you place bets on geopolitical, macroeconomic, or cultural issues on the Polymarket platform—whether it's "Will the Fed cut interest rates in January?" or "Who will win the 2026 Oscar for Best Picture?"—your funds are held in escrow by smart contracts, the entire verification process is transparent, and prizes are automatically distributed via USDC. The entire process requires no bank account, has no geographical restrictions, and there are no intermediaries taking a cut or restricting participants' eligibility.Another industry giant, Kalshi, focuses 90% of its business on the sports sector, covering topics such as "the PGA Farmers Insurance Open champion" and "the result of the Kent State vs. Akron basketball game." Emerging prediction market platform Novig also focuses on the sports field. The Moment of Convergence: Why Now? The current 7-day trading volume of prediction markets has reached $3.9 billion, showing explosive growth. The reasons behind this can be attributed to three points: regulatory maturation, the boost from traditional financial integration, and infrastructure breakthroughs. The most noteworthy regulatory aspect is that CFTC approval has cleared the way for platforms to operate in the United States. For example, in July 2025, Polymarket acquired QCX LLC, a derivatives trading platform licensed by the CFTC, and QC Clearing LLC, a clearinghouse. This allows traders to confidently participate in prediction market contract trading on the Polymarket platform, with clear and unambiguous rules. Kalshi's completion of a $1 billion funding round in December 2025 at a valuation of $11 billion also reflects institutional investors' confidence in the field. Overall, regulatory clarity is unlocking space for institutional and retail investor participation through established brokerage channels. The Intercontinental Exchange (ICE), in addition to investing $2 billion in Polymarket, will also become the global distributor of Polymarket's event-driven data—a move that highlights the growing trend of merging traditional finance with prediction markets. Partnerships further deepen this integration. Polymarket's multi-year partnership with TKO Group Holdings makes it the official exclusive partner of the Ultimate Fighting Championship (UFC) and Zuffa Boxing, directly combining prediction market technology with live fan experiences. In 2026, Kalshi will partner with CNN and CNBC, allowing viewers to view real-time prediction probabilities in news feeds. Both Polymarket and Kalshi have partnered with Google; Robinhood, Fanatics, Coinbase, and other companies have also entered the field through partnerships or native applications. In November 2025, Robinhood's prediction market saw 3 billion contracts traded, a 20% increase month-over-month, demonstrating significant retail participation. Technological advancements drove infrastructure breakthroughs, including: multi-chain expansion leveraging Polygon, Solana, Base, and Gnosis Chain; integration of AI oracles for permissionless instant settlement; and the adoption of a hybrid Automated Market Maker (AMM) and order book model to reduce transaction friction and improve liquidity. In contrast, when the early platform Augur launched, both the technology and regulatory environment were immature, making its development extremely difficult.Market Dynamics: Leading Players and Challengers While Polymarket currently dominates the industry, its position may still face challenges from competitors seeking to offer users more choices. In fact, in 2025, 12 institutions either submitted applications for Designated Contract Market (DCM) status or successfully obtained it, a 500% increase from the previous year. Furthermore, some companies are seeking to partner with DCMs to provide prediction market services as "futures commission brokers." Below is a brief comparison of Polymarket and Opinion platforms (data period: 30 days ending December 3, 2025): • Polymarket Key Data: Open Interest: $247.1 million; Notional Trading Volume: $4.39 billion; 82% market share of total value locked (TVL); Historically zero-fee model drives user growth. Opinion Key Data: TVL surged 110% in 30 days (from $30 million to $63 million); estimated monthly trading volume of $4 billion, posing a potential impact on existing market share; achieving product-market fit on emerging Layer 2 infrastructure. Network effects and a "winner-takes-all" market structure are attracting significant growth capital—these platforms offer scalable diversification options for traditional derivatives and betting products. Profit models are also moving beyond single-fee models, including: licensing real-time probability data to news media and financial terminals; API integration with social platforms and applications; and some companies (such as Robinhood) using this to cross-sell core financial services. User behavior is shifting; traders are gradually moving towards prediction markets—markets with more sophisticated speculative structures that can serve as hedging tools and provide alpha returns for decentralized finance (DeFi) portfolios. This migration trend may extend to more related event contracts, as real-time probability predictions are more accurate than traditional polls in the political and economic spheres. While Polymarket initially gained media attention for its political predictions, it is not limited to this area. Its largest markets by open interest include: • Non-election politics: $55 million • Cryptocurrency: $52 million • Business: $36 million • Election: $22 million • Popular culture: $20 million • Sports: $20 million • Total: $242 million New entrants continue to emerge: Crypto.com partnered with Hollywood.com to launch an entertainment-focused prediction market covering topics such as movies, television, theater, actors, musicians, and award winners; Limitless focuses on short-term prediction markets for cryptocurrency and stock prices, a platform originating from Project X (formerly Twitter) and backed by investments from Coinbase and 1confirmation.Controversy, Challenges, and Emerging Solutions: Prediction markets still face several pain points, including centralized risks, manipulation issues under traditional oracle models, and settlement delays caused by manual reporting systems. Regulatory gray areas persist, including the classification controversy surrounding sports betting. For example, in November 2025, a Nevada judge ruled that Kalshi was a betting platform and not exempt from the state's betting regulations. Kalshi argued that its platform was a federally regulated financial trading platform offering legitimate derivative contracts (event-based contract swaps), not betting. Following the ruling, Kalshi initiated appeals, and similar controversies have arisen in Massachusetts. Regardless of the outcome, several issues remain to be addressed, including age restrictions and concerns related to responsible betting. Cross-border regulatory arbitrage may also hinder industry development. Market manipulation risks also need to be managed, such as the impact of large players on low-liquidity markets, wash trading and price manipulation in decentralized environments, and the difficult balance between "permissionless trading" and "market credibility." The current market landscape is constantly evolving, including the emergence of perpetual prediction markets targeting "persistent outcomes," combinatorial markets handling complex, multivariate events, and binding curve mechanisms to enhance dynamic liquidity. Furthermore, multiple opportunities exist: using prediction market probabilities as oracle inputs for DeFi protocols; enabling secondary trading and leverage through tokenized positions; and combining prediction markets with yield strategies and portfolio hedging. Emerging solutions focus on three main directions: providing AI-driven instant settlement for permissionless markets; integrating trading platform oracles to reduce front-running; and developing application chains with embedded consensus mechanisms to ensure oracle credibility. Looking ahead, three factors will drive wider adoption of prediction markets in the short term: CFTC-approved US platforms launching through established brokers; integration with social platforms (such as embedding prediction APIs in tweets); and emerging banks embedding prediction markets to merge financial and speculative functions. In addition, as prediction markets gradually develop into an independent category of financial markets, vertical prediction markets targeting specific sectors (such as sports and business) may emerge. For example, Novig, a prediction market centered on sports, is focusing on creating a highly customized market and user experience for sports betting users. As prediction markets become a more prevalent consumer behavior, these vertical platforms may offer a better user experience than a one-size-fits-all, comprehensive platform.In the next 1-3 years, prediction markets focused on privacy protection may adopt zero-knowledge proof technology; governance applications such as predictive governance (Futarchy) and outcome-based decision-making may also gradually develop. (Note: "Futarchy" is a new governance concept proposed by economist Robin Hanson around 2000. Its core is to guide decision-making with "predictions of future outcomes," rather than relying on traditional voting, expert judgment, or power hierarchies. Its name is a combination of "future" and "archy," and can be directly translated as "predictive governance" or "future-oriented governance.") However, the industry may still face obstacles, including: tighter regulatory control, restricting global access or product scope; user fatigue if the market cannot improve prediction accuracy; and more intense competition after traditional platforms adopt blockchain technology. As integration deepens, prediction markets will bring many positive social impacts: providing collective wisdom support for resource allocation and policy decision-making; building decentralized prediction into public infrastructure; and driving the transformation of media and governance from a "polling model" to a "participatory probability market model." The question now is no longer whether prediction markets can scale, but rather how many prediction markets will emerge in the future, and which models can seize this trillion-dollar opportunity—that is, pricing real-world uncertainty on-chain. These predictions will become an important supplement to human wisdom and predictive capabilities. [Foresight News]