The evolution of crypto prediction markets is fascinating because it was once categorized as a "disproven" track. It took a decade to achieve PMF (Product-Market Fit), and its evolution has surpassed market expectations. Sometimes, in the crypto space, drawing conclusions too early may not be appropriate.
The concept of prediction markets itself is not new; it has existed in the crypto field for a long time. In 2015, the Gnosis project began development; in 2018, Augur officially launched. It is a decentralized prediction market platform based on Ethereum, allowing users to create and predict future events and settle using cryptocurrency.
In 2020, Polymarket (based on Polygon) also launched, but it has always been in a marginalized state. Coupled with regulatory factors, it has been struggling. Polymarket's monthly trading volume was only a few million dollars initially; Augur's TVL plummeted nearly 80% after the 2020 election, sliding from its peak to a few million dollars. The overall industry TVL peak hovered around $7 million, with monthly trading volumes less than $100 million. Regulatory pressure (such as the CFTC viewing it as "gambling") and imperfect oracles (prone to manipulation) further suppressed growth.
The real explosion of the entire prediction market only began in 2024. Especially, the 2024 US election became a turning point. Polymarket's election prediction market trading volume exceeded $2.7 billion, and the platform's monthly trading volume surged from $62 million in May to $2.1 billion in October, an increase of over 30 times. The annual nominal trading volume reached $16.3 billion, far exceeding the previous total.
Why did it take ten years to achieve PMF?
First, early crypto faced technical and user experience barriers. The prediction market concept was good and seemed to have significant demand, but the specific user experience excluded the vast majority of users. For example, early Augur was built on Ethereum L1, with very high transaction costs—gas fees were terrifyingly high back then, and confirmation speeds were slow. Additionally, ordinary users had to master wallets and complex interfaces, which involved a steep learning curve. These high barriers corresponded to insufficient liquidity and user concerns about manipulation.
Second, regulatory pressure has always existed. The US CFTC (Commodity Futures Trading Commission) categorized prediction markets as "gambling" or derivatives and intensified scrutiny after 2018. During this period, Augur was fined for betting on sensitive events; Polymarket paid a $1.4 million fine in 2022 and exited the US mainland. Its founder, Shayne Coplan (born in 1998), even had his New York apartment raided by the FBI, who confiscated his electronic devices (without arrest). Regulatory ambiguity prevented institutional funds from entering. Regulatory pressure made it difficult to increase liquidity.
Third, changes in market narrative. From 2016 to 2018, most crypto users focused more on speculation than utility tools; the DeFi/NFT boom from 2020 to 2023 diverted attention, with prediction market TVL only at $7 million. The lack of mainstream event drivers made it difficult to accumulate liquidity.
Fourth, oracles were immature and easily manipulated.
2024 was a turning point. As mentioned above, the 2024 US election was a catalyst, but it was far more than that.
From 2024 to now, prediction markets have truly taken off. Besides Polymarket, the centralized prediction platform Kalshi has emerged. In 2025, prediction market trading volume reached $27.9 billion (a 210% year-on-year increase), with a weekly peak of $2.3 billion. The combined TVL of Polymarket and Kalshi exceeded $20 billion. Both are valued at tens of billions of dollars. Prediction markets suddenly became the market's darling.
So, what are the driving factors?
Contrary to the obstacles encountered between 2015 and 2024, these barriers have been removed one by one, leading to a qualitative improvement in user experience and other aspects.
First, changes in technical barriers/user experience. Polygon, Base L2 networks reduced gas fees to a few cents, increasing transaction speeds by 10 times. Platforms like Polymarket optimized UIs, supporting one-click betting with stablecoins, attracting non-crypto natives. Additionally, DeFi has developed significantly, providing deep liquidity. For users, participating in prediction markets has become very convenient. Kalshi is a centralized prediction platform integrated with Robinhood, etc., making user participation even easier.
Second, regulatory changes. After the 2024 US election, regulation pushed for crypto-friendly policies. The CFTC approved regulated platforms like Kalshi in 2025. The SEC/CFTC clarified the legality of "spot commodity crypto," and stablecoin legislation passed Congress. Overseas, such as in Switzerland, although there are blacklists, the overall environment shifted from hostile to supportive, with institutional funds pouring in (e.g., ICE investing $2 billion).
Third, changes in market narrative. This cycle lacks a particularly dominant narrative. Real utility has become a focus. Coupled with the catalyst of the 2024 election predictions, Polymarket expanded into sports, economics, technology, and other fields. Media promotion (e.g., reports by CNN/Bloomberg) and social network dissemination fueled the prediction market boom.
Fourth, both institutions and communities are driving it. a16z actively participates, creating a narrative around "event-driven financial infrastructure." Community users also actively participate, pushing up TVL.
Fifth, prediction markets are gradually evolving from "gambling" into a new type of signal, similar to providing real-time probability signals.
From the decade-long evolution of prediction markets, an interesting conclusion can be drawn: not all "disproven" tracks necessarily lack PMF. Sometimes, it's just because the conditions aren't ripe yet. In the crypto space, this phenomenon is particularly evident. Due to the imperfect infrastructure in the first decade (expensive/slow/poor user experience...), many attempts couldn't smoothly reach ordinary users. Perhaps future Crypto Game/social/ai agent/DePIN/digital identity... and other tracks, some parts may be over, but some sectors will still have opportunities to prove themselves again.
