If you think the venture capital world is only focused on AI, look closer. A seismic shift is happening in the world of finance and speculation, transforming online betting into a powerful new asset class: Prediction Markets. These platforms allow you to trade contracts based on the outcomes of future events across everything from finance, culture, entertainment, sports, politics, and the economy. Users buy contracts that settle at either zero or $1 once the event resolves.
Prediction markets are rapidly moving from the basement of niche trading to the forefront of financial data, attracting massive capital and drawing the intense focus of giants like the owner of the New York Stock Exchange.
Why the Explosion? Validation, Volume, and the Search for Truth
The innovation isn’t the concept (prediction markets have existed for decades) but rather the confluence of regulatory clarity, infrastructure maturity, and institutional adoption that’s creating a legitimate new asset class.
Right now on Polymarket, you can bet on questions like “Will the U.S. government experience a shutdown before December 2025?”, “Will aliens be officially discovered in 2025?”, or “Will Bitcoin reach $150,000 in 2025?” Each market shows real-time probability based on where contracts are trading. If the Bitcoin market trades at $0.32, the crowd estimates a 32% chance of BTC hitting $150k this year.
The recent boom hasn’t been gradual; it’s been an explosive surge driven by three major factors:
- Institutional Validation: Nothing signals a market shift like the entry of established finance. The New York Stock Exchange owner, Intercontinental Exchange (ICE), recently announced plans to invest up to $2 billion in Polymarket. This massive commitment valued the world’s largest prediction market at $8 billion pre-money, essentially giving the entire sector a stamp of approval.
- Regulatory Breakthroughs and Volume Records: A key moment arrived last October when the prediction market Kalshi won a lawsuit allowing it to legally list presidential election-themed contracts, immediately causing trading activity to explode. Consequently, the notional trading volume on the leading platforms, Polymarket and Kalshi, hit a new record high, surpassing $2 billion for the first time during the week ending October 19th. This figure actually eclipsed the previous peak seen during last year’s frenzied US presidential election.
- The Quest for Unfiltered Information (Skin in the Game): To many proponents, prediction markets are the ultimate crowdsourced probability engines. They serve as an unfiltered source of truth. In a world of “fake news,” these markets act as the “newspaper” because the money reflects what people genuinely believe, not just what they say, due to having “skin in the game”.
The range of markets highlights this dynamic—users are betting on things as profound as when the U.S. government shutdown will end to as specific as the least streamed song on Taylor Swift’s latest album.
The Main Players and Rising Startup Unicorns
The prediction market landscape is currently dominated by fierce competition between two rapidly expanding startups, alongside aggressive moves from established sports betting giants.
1. Kalshi
Founded in New York in 2018, Kalshi is experiencing extraordinary demand. Following a recent $300 million funding round co-led by Andreessen Horowitz and Sequoia Capital at a $5 billion valuation, the company is now fielding funding offers from VCs that would value the startup at more than $10 billion, with discussions reaching $12 billion or higher.
Kalshi’s aggressive expansion into sports contests nationwide has driven much of its recent volume increase. The company recently reached an annualised trading volume of $50 billion and has expanded its offerings by debuting parlays (low-odds wagers bundled together). Kalshi has also partnered with trading app Robinhood, drawing in new users.
2. Polymarket
Polymarket is widely considered the world’s largest prediction market. Its valuation soared after the investment announcement from NYSE owner ICE, valuing it at $8 billion pre-money.
Polymarket previously barred US customers due to regulatory issues but is planning a re-entry into the US market after acquiring QCEX, a CFTC-licensed derivatives exchange. The platform also secured an undisclosed investment from 1789 Capital, a venture capital firm backed by Donald Trump Jr.. While Kalshi briefly surpassed Polymarket in notional volume due to the sports betting boom, Polymarket reclaimed the crown recently.
3. DraftKings and Railbird
Traditional gambling firms are moving in too. Sports betting giant DraftKings is acquiring the predictions platform Railbird which comes with a prediction markets license. DraftKings is preparing to launch a new mobile platform called DraftKings Predictions. They targeted Railbird specifically for its team and proprietary technology, as Railbird is licensed by the Commodity Futures Trading Commission (CFTC) to offer an event contracts exchange. This comes six months after Draftkings tried to do it themselves with Draftkings Predict, but retreated after encountering regulatory hurdles.
Some pundits are trying to put the impact of prediction markets on betting in context – this is more than just a blip, it’s a behaviour change:
How the Market Will Develop: Data, Conflict, and Insider Trading
The future of prediction markets is poised to disrupt multiple industries, from finance to traditional gambling, but not without regulatory friction.
A. Data Monetization is the Real Prize
ICE’s interest in Polymarket isn’t just about clearing contracts; it’s about monetizing the data. The plan is to use Polymarket’s event-driven data to provide sentiment indicators on relevant market topics, effectively selling “odds as sentiment factors” alongside traditional financial data. This data has direct applications in:
- Financial market sentiment analysis
- Risk management and hedging strategies
- Media and research insights
- Corporate intelligence and strategic planning
When a Polymarket question like “Will the Federal Reserve cut rates by 50 basis points?” trades at $0.73, that 73% probability estimate represents aggregated views from thousands of participants with money on the line. This signal often proves more accurate than expert polls or analyst predictions because participants have financial incentive to be right.
Selling probability data as sentiment factors alongside traditional financial feeds could dwarf transaction fee revenue over time.
B. The Sports Betting Regulatory Conflict
The rapid expansion into sports has created intense conflict with state gaming regulators who view these markets as unlicensed gambling. States like Nevada have warned companies they risk losing their gambling licenses if they offer sports event contracts. To navigate this, DraftKings may focus sports event contracts only on states without licensed sports betting, such as California and Texas. Fanduel partnered with exchange giant CME Group to introduce contracts tied to sports games to compete with platforms like Kalshi.
Just this week, The NHL has become the first major U.S. sports league to partner with prediction market platforms, signing a multi-year licensing deal with Kalshi and Polymarket. It’s therefore likely to assume others will follow.
C. Insider Information: A Feature, Not a Bug
Prediction markets treat insider information in a fundamentally different way than traditional stock markets, where it is a severe crime. In this new ecosystem, using internal information is considered a feature, not a bug. The rapid exposure of such “alpha” information is seen as a way to quickly achieve the most accurate forecast.
Real-world examples illustrate this power:
- The Nobel Prize: When $21 million was riding on the question of “Who will win the Nobel Peace Prize?”, hours before the official announcement, mysterious new users registered on Polymarket and rapidly wagered tens of thousands of dollars on one specific political candidate. The prediction market successfully predicted the winner ahead of the announcement, indicating someone with internal knowledge had traded.
- Military Action: In another notable instance, hours before military attacks were launched in Yemen, someone entered Polymarket and profited tens of thousands of dollars from the knowledge that the strike was imminent.
D. The Arbitrage Opportunity
Because prediction markets are still new and, in some ways, inefficient, opportunities for arbitrage—risk-free profit by betting for and against simultaneously across different markets—exist. This is currently being exploited by thousands of bots. However, as more sophisticated players enter the market, this phase is expected to diminish as the market becomes more efficient.
What this means for VCs and Startups
The risks are substantial. Regulatory backlash remains possible, particularly around sports betting and politically sensitive markets. Liquidity fragmentation across competing platforms could prevent any single winner from emerging. Legitimacy concerns persist. Prediction markets must avoid becoming associated with pure gambling to maintain institutional adoption.
Yet the trajectory is clear. When traditional financial institutions begin treating prediction market data as core infrastructure, when top-tier VCs deploy growth-stage capital at billion-dollar valuations, and when trading volumes reach institutional scale, a new asset class is forming in real time. There are plenty of opportunities for startups to tackle in this space:
- Infrastructure and tooling: Analytics platforms, API providers, market-making algorithms
- Data and intelligence: Aggregators that normalize and resell prediction market data
- Regulatory and compliance: Services helping platforms navigate evolving regulatory frameworks
- Verticalized markets: Niche prediction platforms focused on specific industries (crypto, entertainment, technology)
The question for investors isn’t whether prediction markets represent a viable category. The capital markets have already answered that. The question is which business models and regulatory strategies will capture durable value as the market matures.
At Remagine Ventures, we’re following this phenomenon and looking to speak with founders in stealth or pre-seed startups building in this space.
He is a former General Partner at Google Ventures (GV) in Europe, former head of Google for Entrepreneurs in Europe, and founding head of Campus London, Google's first startup hub. Eze writes on Israeli tech, venture capital, artificial intelligence, and founder strategy.
He is also the founder of Techbikers, a nonprofit that brings together the startup ecosystem on cycling challenges in support of Room to Read.
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