The crypto prediction market, once considered a “falsifiable” sector, took a full decade to achieve true product-market fit (PMF), with its explosive growth finally arriving in 2024-2025.
- A Slow Start: Early platforms like Gnosis (2015) and Augur (2018) struggled with high Ethereum gas fees, complex user interfaces, and low liquidity. Regulatory pressure, with bodies like the CFTC labeling markets as “gambling,” stifled growth and kept institutional money away.
- The 2024 Turning Point: The U.S. presidential election acted as a major catalyst. Polymarket’s trading volume for the election surged, with its monthly volume exploding from $62 million in May 2024 to $2.1 billion by October.
- Key Drivers for Takeoff:
- Improved Tech & UX: Layer 2 solutions (Polygon, Base) slashed fees and sped up transactions. Platforms simplified interfaces for one-click betting.
- Regulatory Shifts: Post-2024, a more crypto-friendly regulatory environment emerged, including CFTC approval for platforms like Kalshi and clearer legislation, allowing institutional capital to flow in.
- Market Narrative Change: Attention shifted from pure speculation to real-world utility, amplified by media coverage and social network buzz around event prediction.
- Evolution of Use Case: Prediction markets transformed from being seen as “gambling” into a new type of signal for real-time probability on events spanning politics, sports, and economics.
The decade-long journey shows that some crypto sectors deemed to have failed may simply have been ahead of their time, waiting for infrastructure, regulation, and market focus to mature.
The evolution of the crypto prediction market is fascinating as a result of it was as soon as thought of a “falsifiable” sector. It took a decade to attain Product-Market Match (PMF), a course of that exceeded market expectations. Generally, in the crypto house, drawing conclusions too early is not advisable.
The idea of prediction markets shouldn’t be new; it has existed in the crypto house for a very long time. The Gnosis mission began improvement in 2015; and Augur formally launched in 2018. It’s a decentralized prediction market platform primarily based on Ethereum that enables customers to create and predict future occasions and settle them utilizing cryptocurrencies.
Polymarket (primarily based on Polygon) launched in 2020, however has remained marginalized ever since. Coupled with regulatory elements, it has struggled to outlive. Polymarket’s preliminary month-to-month buying and selling quantity was solely a few million {dollars}; Augur’s TVL plummeted practically 80% after the 2020 election, falling from its peak to a few million {dollars}. The general business TVL peaked at round 7 million {dollars}, with month-to-month buying and selling quantity lower than 100 million {dollars}. Regulatory stress (resembling the CFTC viewing it as “playing”) and imperfect (manipulable) oracles additional hampered progress.
The prediction market did not really explode till 2024. Particularly, the 2024 US presidential election grew to become a turning level. Polymarket’s marketing campaign prediction market noticed buying and selling quantity exceed $2.7 billion, with the platform’s month-to-month buying and selling quantity surging from $62 million in Might to $2.1 billion in October, a greater than 30-fold improve. The whole notional buying and selling quantity for the 12 months reached $16.3 billion, far exceeding the whole of all earlier years.
Why did it take ten years to attain PMF?
First, the early crypto house confronted technical and person expertise limitations. Whereas the idea of prediction markets appeared promising and demand immense, the person expertise excluded the overwhelming majority of customers. For instance, early variations of Augur have been constructed on Ethereum’s L1 platform, leading to extraordinarily excessive transaction prices—GAS was prohibitively excessive at the time—and sluggish affirmation speeds. Moreover, peculiar customers needed to grasp wallets and sophisticated interfaces, all of which introduced important studying curves. These excessive limitations corresponded to inadequate liquidity and person issues about manipulation.
Secondly, regulatory stress has been fixed. The U.S. Commodity Futures Buying and selling Fee (CFTC) has intensified its scrutiny of prediction markets since 2018, classifying them as “playing” or derivatives. Throughout this era, Augur was fined for betting on delicate occasions; Polymarket paid a $1.4 million high quality and withdrew from the U.S. in 2022; and even its founder, Shayne Coplan (born in 1998), had his New York condo raided by the FBI, who seized his digital gadgets (however didn’t arrest him). This regulatory ambiguity has prevented institutional funds from coming into the market. Regulatory stress has made it tough for liquidity to enhance.
Thirdly, there was a shift in market narrative. In the crypto house from 2016 to 2018, most customers centered extra on hypothesis than sensible instruments; the DeFi/NFT increase from 2020 to 2023 distracted consideration, leading to a prediction market TVL of solely $7 million. The dearth of mainstream occasions hindered the accumulation of liquidity.
Fourth, oracles are immature and simply manipulated.
2024 will be a turning level. As talked about above, the US presidential election in 2024 will be a catalyst, nevertheless it will be way more than that.
From 2024 to now, prediction markets have really taken off. Apart from Polymarket, the centralized prediction platform Kalshi has additionally emerged. In 2025, prediction market buying and selling quantity reached $27.9 billion (a year-on-year improve of 210%), with a weekly peak of $2.3 billion. The mixed TVL of Polymarket and Kalshi exceeded $20 billion. Each have been valued at tens of billions of {dollars}. Prediction markets instantly grew to become the darling of the market.
So, what are the driving elements?
In stark distinction to the obstacles encountered between 2015 and 2024, these obstacles have been eliminated one after the other, leading to a qualitative enchancment in varied features resembling person expertise.
First, there are adjustments in technological limitations and person expertise. Polygon and Base L2 networks have lowered gasoline charges to mere cents and elevated transaction speeds tenfold. Platforms like Polymarket have optimized their UIs, supporting one-click stablecoin betting and attracting non-crypto natives. Moreover, DeFi has seen important progress, offering deeper liquidity. For customers, taking part in prediction markets is now very handy. Kalshi, a centralized prediction platform, has built-in with platforms like Robinhood, making person participation even simpler.
Second, regulatory adjustments. Following the 2024 US presidential election, regulators pushed for crypto-friendly insurance policies. The CFTC permitted regulated platforms like Kalshi in 2025. The SEC/CFTC clarified the legality of “spot commodity crypto,” and stablecoin laws handed Congress. Abroad, whereas Switzerland maintains a blacklist, the total setting has shifted from hostile to supportive, with institutional funds flowing in (e.g., ICE invested $2 billion).
Third, the market narrative has shifted. Throughout this cycle, no single narrative has been significantly dominant. As an alternative, real-world purposes have develop into the focus of market consideration. Coupled with the catalyst of the 2024 election predictions, Polymarkets expanded its attain to areas resembling sports activities, economics, and know-how. Media promotion (resembling protection by CNN/Bloomberg) and the unfold via social networks additional fueled the increase in prediction markets.
Fourth, each establishments and the group are pushing for it, with a16z actively taking part and creating a narrative of “event-driven monetary infrastructure.” Group customers are additionally actively taking part, which has boosted TVL.
Fifth, the prediction market has steadily developed from “playing” into a new sort of sign, just like a sign that gives real-time likelihood.
An fascinating conclusion can be drawn from the decade-long evolution of prediction markets: not all “falsified” sectors essentially lack product-market match (PMF); typically it is just because situations weren’t but ripe. This phenomenon is especially evident in the crypto house. On account of the underdeveloped infrastructure in the first decade (costly/sluggish/poor person expertise, and so on.), many makes an attempt failed to achieve peculiar customers. Maybe some of these sectors—resembling Crypto Video games, social networking, AI brokers, depins, and digital identities—have already ended, however others will nonetheless have a probability to rediscover their potential.
