From the cryptocurrency world to Wall Street, is "prediction markets" becoming mainstream?

Once regarded as a niche experiment within the cryptocurrency circle, prediction markets are rapidly moving towards the mainstream financial world at an unprecedented pace.

The latest move comes from the world's largest derivatives exchange. According to Bloomberg, CME Group Inc. is planning to launch financial contracts linked to sports events and economic indicators by the end of this year. This move will put CME in direct competition with emerging prediction market platforms like Polymarket and Kalshi.

This action has triggered a direct market response. Following the news, shares of DraftKings Inc., a competitor of sports prediction company FanDuel, which partners with CME, fell by 3.8% in after-hours trading, while CME's stock rose in response. Previously, the cryptocurrency prediction market platform Polymarket had just secured a $2 billion investment from Intercontinental Exchange Inc., the parent company of the New York Stock Exchange.

From the satire of the subcultural animated series "South Park" to real-time odds screens on the streets of New York, and to the strategic layouts of top institutions on Wall Street, prediction markets are rapidly evolving from a marginalized financial tool into an emerging track that integrates culture, finance, and information. Whether it can truly become the first widely adopted decentralized finance (DeFi) application is becoming the focus of market attention.

"Regular Army" Enters, Traditional Exchanges Layout

The entry of traditional financial giants is the clearest indicator of the mainstreaming of prediction markets.

According to media reports, CME plans to release its new prediction contract products to the public through its futures commission merchants (FCM), including institutions established in collaboration with sports prediction platform FanDuel.

The partnership between CME and FanDuel was announced earlier this year, initially focusing on products linked to economic indicators. However, CME CEO Terry Duffy clearly stated in an August interview with Bloomberg that he is open to launching sports-related contracts, saying, "We were ready to go operational on day one."

CME's advantage lies in its regulatory status. As an exchange regulated by the U.S. Commodity Futures Trading Commission (CFTC), CME has the authority to "self-certify" new contracts without explicit approval from regulators, which may allow it to quickly advance the launch of new products. This series of actions indicates that traditional exchanges are no longer mere spectators but are preparing to become core players in this emerging market.

Emerging Platforms Rise, Data Highlights Popularity

Before the traditional giants entered the scene, emerging platforms represented by Polymarket and Kalshi had already accumulated a considerable user base and trading volume through their innovative models and market hotspots.

Polymarket is a cryptocurrency-based platform that allows users to bet on the outcomes of real-world events such as elections and sports events using stablecoins. The platform gained prominence during the 2024 U.S. presidential election, with activity and trading volume reaching all-time highs Dune data shows that the number of daily active wallets peaked at over 72,600 on January 19, 2025. Although there has been a decline since then, the platform's activity remains strong, with transaction volumes exceeding $1 billion this month and a cumulative transaction total surpassing $15.7 billion.

Another platform, Kalshi, has taken a compliant route, becoming the first event contract exchange in the United States regulated by the CFTC.

Recently, Kalshi gained popularity on social media for its real-time screen displaying mayoral election odds in New York City, with related videos on the X platform nearing 13 million views. The platform even appeared in the well-known animated series "South Park," highlighting its cultural influence. These platforms have successfully brought prediction markets into broader visibility by capturing public interest in hot events.

Capital Influx and Regulatory Game

The influx of capital and breakthroughs in regulation have jointly paved the way for the mainstreaming of prediction markets. One of the most notable trades is when the parent company of the New York Stock Exchange, Intercontinental Exchange, announced a $2 billion investment to acquire a 25% stake in the crypto prediction market Polymarket. Although Polymarket is currently not open to U.S. users, it acquired a CFTC-regulated exchange earlier this year and plans to launch operations in the U.S., with a valuation potentially reaching $10 billion.

On the regulatory front, Kalshi won a court case against the CFTC last year, clearing the way for it to offer betting contracts related to presidential elections within the United States. Since then, companies like Kalshi have begun to utilize their federal financial licenses to provide sports betting-related services nationwide, although this move still faces resistance from some state gaming regulators and legal uncertainties regarding market manipulation and other issues.

However, the regulatory environment remains complex. For example, some state gaming regulators have stated that they do not allow the sportsbooks they oversee to simultaneously offer federally regulated event contracts. A spokesperson for FanDuel also cautiously stated that the company is "maintaining active dialogue with various stakeholders, including state regulators," while developing products in collaboration with CME.

"Simplicity" May Be Key to Widespread Adoption

Why are prediction markets attracting so much attention at this moment? Mike Rychko, an infrastructure researcher at Azuro, believes the key lies in their unparalleled "simplicity." He pointed out that prediction markets convert complex probabilistic forecasts into simple and intuitive data points, such as "a certain candidate has an 87% chance of winning," a language that anyone can understand.

"Most people will never open an account at a derivatives exchange," Rychko wrote, "but they crave a clean, easy-to-understand signal." He believes that this intuitiveness makes prediction markets more likely to achieve mass adoption ahead of other complex DeFi products.

The data shows that this appeal is evident. According to DefiLlama, although Polymarket's total value locked (TVL) has fallen from a peak of nearly $512 million during the U.S. elections to about $194 million, it has still grown by 2325% compared to $8 million a year ago. This model, which combines cultural relevance with real-world financial participation, is proving its strong market vitality and may ultimately lead to a wave of new financial products.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk