As prediction markets continue to grow rapidly – Bernstein forecasts volume will quadruple to $1 trillion by 2030 – aspects of traditional finance such as leverage, portfolio margining and the value of data are becoming increasingly relevant, according to industry executives and traders.
Monthly notional volume on two of the largest prediction markets, Kalshi and Polymarket, has exploded about 12-fold in the past year, according to data from Piper Sandler. The investment bank estimates that volume for the two markets in October was about $120 billion, up from around $10 billion in October, 2025. Football season in the U.S. – both the NFL and college football – and the soccer World Cup in the summer have been catalysts for the growth, according to Piper Sandler.
And now the market for contracts that predict sports outcomes, weather, elections and economic data is maturing in similar ways to more traditional assets like stocks or futures.
“We're starting to see a lot of institutional interest because there are products that could potentially be a good hedge for insurance or weather,” Eunice Pareja, a managing director for Client Services at Clear Street, said in a panel discussion on Tuesday at the FIA’s Expo conference in Chicago. “I know that sports and elections are very interesting and draw a lot of attention, but there are a lot of other products that are being viewed, especially by our institutional clients, as great hedges for otherwise illiquid products.”
The data created by prediction markets is being seen as one of the more valuable by-products of the trading. Earlier this year, a Federal Reserve study found that predictions for core inflation and the Fed Funds rate on Kalshi “provide statistically significant improvements over fed funds futures and professional forecasters.”
In September, Kalshi markets predicted an 18% chance that the Fed would raise rates, Andy Ross, head of institutional at Kalshi, said during the panel discussion. The CME Group’s Fed Watch had the chance at 44%, yet the Fed didn’t cut rates, Ross said.
“Morgan Stanley said that Kalshi has been more right – as in better priced – on 24 out of 26 of the last Fed decisions,” Ross said. “There's a huge amount of economic alpha that you can get by looking at this data.”
Samuel Shorthouse, head of sales and client engagement at ION, agreed. “The data is going to be massively used on the institutional side to help inform other trading decisions, at least in the next couple of years. I expect to see that that demand will grow significantly,” he said.
The markets have drawn scrutiny and resistance from many. Lawsuits are working their way through the courts to decide if the federal government or states have the right to regulate prediction markets. The industry is treading on turf traditionally controlled by casinos, sports-betting firms and exchanges. Prediction contracts have also been shown to be susceptible to manipulation.
In one case, that manipulation came from the Teleprompter operator for US President Donald Trump, Kalshi’s Ross said.
“There was a story that someone was winning an awful lot of money on what Mr. Trump was saying, and it transpired that we looked at that and that we thought that's a bit odd,” said Ross, who added that the company has a former FBI employee on its payroll.
“It transpired that the guy who was winning was the person who was loading Mr. Trump's Teleprompter, and we found him, and we caught him,” Ross said. “He's both banned from the market and suffering from criminal prosecution for insider trading. This is stuff that if you want to do it on markets, don't do it on the regulated ones like Kashi, because we're going to find you and you're going to go to jail.”
David Bensoussan, a prediction markets trader who specialises in politics and elections, said he uses alternate identities for some of his trades to avoid moving prices due to the trading bots that follow his trading, where he’s known as Scottilicious.
“There was a day on C-SPAN when Kennedy and Tillis were yelling at Christie Noem, and it became pretty clear to me that she was going to be exiting DHS pretty soon,” Bensoussan said during the panel discussion. “That market was very illiquid. We made about eight times our money because it happened literally the next day. I had to use an alt because if I didn't use an alt, people would – I have maybe 40 bots following Scottilicious, and that would have just blown up the price out of the water.”
Rob Creamer, chief executive officer of Geneva Trading and the panel moderator, said advancements in prediction markets for weather could be beneficial.
“I'm certainly fascinated by the weather outcomes, prediction markets around weather events, hurricanes, storms,” he said. “We have so many natural disasters. I think people are going to find very clever ways of using this and hopefully cascading it down to people where they can really manage risk themselves, particularly in areas that that lack insurance.”
He isn’t a fan of sports prediction markets, however. “To me it's always been gambling,” Creamer said. “I totally respect people that go into this. I know Susquehanna, who has an enormous operation and is an incredible firm, is really heavily vested in these markets, and I respect their ability to support them. It's just unique to Geneva. I just don't feel like for us that's an area that I really want to push forward.”
Ross said Kalshi is working on a type of portfolio margining that nets contracts to buy and sell. “That's work that we're currently underway,” he said. “But I don't have a date for it.” He was optimistic about the growth of prediction markets due to the mix of retail, small institutional and large institutional traders.
“The total volume on prediction markets in five years will be more than you will see on a normal stock exchange,” Ross said.
