The evolution of the crypto prediction market is fascinating because it was once categorized as a "disproven" track. It took a full decade to achieve PMF (Product-Market Fit), and its development has surpassed market expectations. Sometimes, in the crypto space, drawing conclusions too early might not be appropriate.
The concept of prediction markets itself isn't 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 was a decentralized prediction market platform built on Ethereum, allowing users to create and bet on future events, with settlements made using cryptocurrency.
In 2020, Polymarket (based on Polygon) also launched, but it remained on the fringes. Coupled with regulatory factors, it struggled along. Polymarket's initial monthly trading volume was only in the millions of dollars; Augur's TVL plummeted nearly 80% after the 2020 election, sliding from its peak to just a few million dollars. The entire industry's peak TVL hovered around $7 million, with monthly trading volumes under $100 million. Regulatory pressure (e.g., the CFTC viewing it as "gambling") and imperfect oracles (prone to manipulation) further stifled growth.
The real explosion of the entire prediction market only began in 2024. Particularly, 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 soared from $62 million in May to $2.1 billion in October, a growth of over 30 times. The annual nominal trading volume reached $16.3 billion, far exceeding the sum of all previous years.
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 the demand seemed significant, but the actual user experience excluded the vast majority. For example, early Augur was built on Ethereum L1, with extremely high transaction costs—gas fees were frighteningly 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 was constant. The US CFTC (Commodity Futures Trading Commission) categorized prediction markets as "gambling" or derivatives and increased 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 (though he wasn't arrested). Regulatory ambiguity prevented institutional funds from entering. This pressure made it very difficult to build liquidity.
Third, the market narrative shifted. From 2016-2018, most crypto users were more focused on speculation than utility tools; the 2020-2023 DeFi/NFT frenzy diverted attention, with prediction market TVL stuck at just $7 million. The lack of major event drivers made it hard to accumulate liquidity.
Fourth, oracles were immature and easily manipulated.
2024 was the turning point. As mentioned, 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 the tens of billions of dollars level. Prediction markets have suddenly become the market's darling.
So, what are the driving factors?
In contrast to the obstacles faced between 2015-2024, 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, and others have reduced gas fees to just cents and increased transaction speeds by 10 times. Platforms like Polymarket have optimized UIs, supporting one-click betting with stablecoins, attracting non-crypto natives. Furthermore, DeFi has developed immensely, providing deep liquidity. For users, participating in prediction markets has become very convenient. Kalshi, being a centralized prediction platform integrated with Robinhood and others, offers even easier participation.
Second, regulatory changes. After the 2024 US election, regulators pushed 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, places like Switzerland, despite having blacklists, show an overall environment shifting from hostile to supportive, with institutional funds pouring in (e.g., ICE investing $2 billion).
Third, market narrative change. This cycle lacks a particularly dominant narrative. Real utility has become a focus. Coupled with the catalyst of the '24 election predictions, Polymarket expanded into sports, economics, tech, and other fields. Media push (e.g., reports by CNN/Bloomberg) and social network dissemination fueled the prediction market boom.
Fourth, both institutions and communities are driving growth. a16z is actively participating, creating a narrative around "event-driven financial infrastructure." Community users are also actively participating, pushing up TVL.
Fifth, prediction markets are gradually evolving from "gambling" into a new signal type, akin to providing real-time probability signals.
From the decade-long evolution of prediction markets, an interesting conclusion emerges: not all "disproven" tracks necessarily lack PMF. Sometimes, the conditions just aren't ripe yet. This phenomenon is especially evident in the crypto field. Due to the underdeveloped infrastructure in the first decade (expensive/slow/poor user experience...), many attempts couldn't successfully reach ordinary users. Perhaps future Crypto Game/social/AI agent/DePIN/digital identity... and other tracks, some parts might be over, but some sectors might still have a chance to prove themselves again.
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