A new chapter for an ancient industry worth over $50 billion: How can crypto reshape prediction markets?

If you traveled back to 17th-century London, you would see a scene at Lloyd’s Coffee House on Tower Street: shipowners, merchants, and investment underwriters gathered around greasy wooden tables, fiercely bargaining over whether their merchant ships would return safely from their voyages. At that time, it was the hub of global shipping information and the embryonic form of modern insurance—people betting on “news” to hedge risks.

Today, over 300 years later, this business of “pricing future uncertainty” has moved onto permissionless blockchains. From U.S. presidential elections to Oscar winners, from Federal Reserve rate hikes to whether a crypto project will “Rug Pull,” users worldwide are betting over $50 billion on-chain. This is not simple gambling but a restructured “prediction market”—an information financial tool that uses financial incentives to aggregate collective intelligence.

Ancient Business, New Container

The underlying logic of prediction markets is not new. As early as the 1880s, Wall Street’s “bucket shops” allowed ordinary people to make small bets on stock prices without actually owning the stocks. However, due to a lack of transparent pricing mechanisms and trust guarantees, such activities long operated in gray areas and were eventually rejected by modern financial regulation.

The problem with traditional predictions is its centralization paradox: if the platform (the house) can arbitrarily change odds or even misappropriate funds, the market’s price signals lose their meaning. This is where blockchain technology comes in. Through smart contracts, prediction markets become autonomous, asset-escrowed “information exchanges.” As Hotcoin Research points out, unlike traditional betting platforms with preset odds, on-chain prediction markets use open order books or automated market makers (AMMs) for pricing, with prices generated by the trading game between participants. The platform only charges fees and bears no outcome risk.

Dawn of Regulation and Wall Street’s “U-turn”

Any industry involving “future event trading” cannot avoid regulatory scrutiny. For a long time, the U.S. Commodity Futures Trading Commission (CFTC) has been cautious about such markets. But a turning point came in 2025.

In February 2026, the CFTC, in a “friend of the court” brief submitted to the Ninth Circuit Court of Appeals, reaffirmed its exclusive jurisdiction over prediction markets (i.e., event contracts). CFTC Chair Michael S. Selig stated: “Event contracts allow firms and individuals to hedge event-driven risks… These products are commodity derivatives, squarely within the CFTC’s regulatory remit.” This statement was essentially a contest for interpretive authority with state gambling regulators, positioning prediction markets as “legitimate derivatives markets” rather than “gambling.”

This regulatory clarity attracted traditional financial giants. Robinhood CEO Vlad Tenev recently said in a earnings call that prediction markets are entering a “super cycle,” and their business has become Robinhood’s fastest-growing sector. In January 2026 alone, the trading volume of event contracts hit an astonishing 3.4 billion. This “duopoly” of compliant exchanges (like Kalshi) and decentralized platforms (like Polymarket) drove the total market volume in 2025 to a record $50.25 billion.

Data Speaks: The Reality of Trillions

Why are Wall Street and crypto-native users suddenly flocking to prediction markets? Because they solve two stubborn issues of traditional information revelation: lag and subjectivity.

Take Polymarket as an example. According to Dune data, its market composition is highly diverse: sports (39%), politics (34%), and cryptocurrencies (18%) form the three main pillars. This diversity turns the market into a real-time “on-chain public opinion monitor.” For instance, after on-chain investigator ZachXBT announced an insider trading report scheduled for February 26, 2026, the prediction market on ZachXBT’s “who will be hammered” surged past $9 million in trading volume. Bettors use fragmented information to buy and sell, and the real-time shifts in probabilities (e.g., a project’s chance dropping from 53% to 28%) provide highly valuable market insights.

This “group intelligence” often surpasses polling accuracy. For macro traders, prediction market prices are no longer just speculative tools but can serve as “oracles” to guide real-world decisions.

Crypto Infrastructure Wins: Gnosis and Augur’s Exploration

While Polymarket and Kalshi dominate most traffic, the underlying infrastructure of the entire sector relies on veteran crypto projects. As the pioneer of decentralized prediction markets, Augur proved the feasibility of “permissionless predictions” in the last cycle, despite criticisms of user experience and liquidity. As of February 25, 2026, Augur (REP) traded around $0.916 on Gate, far from its peak, but its smart contracts still provide settlement services for long-tail events.

The real backbone of this explosive growth is Gnosis. Gnosis not only developed its own conditional tokenization protocol but also provided critical scalability infrastructure for Polymarket. As a veteran Ethereum sidechain project, Gnosis Chain’s low costs and high efficiency make high-frequency prediction trading possible. According to Gate data, Gnosis (GNO) was priced around $123 on February 25, 2026. Though it pulled back slightly with the market, its ecosystem value is being reassessed.

From “Bet Big or Small” to “Information Hedging”

On comprehensive trading platforms like Gate, users may initially encounter prediction tokens from a speculative perspective. But as the sector grows, its logic is undergoing profound change.

Galaxy Research reports that one of the core themes of the 2026 crypto market is a “return to practicality.” Prediction markets exemplify this practicality. They are no longer isolated “gambling DApps” but have become an information layer within DeFi ecosystems. For example, a user heavily holding Ethereum could hedge by betting on the event “Ethereum Foundation will sell ETH before Q2 2026” in the prediction market. If a negative event occurs, profits from the prediction contract can offset losses in spot holdings.

This attribute of financial derivatives begins to touch on the original vision of Lloyd’s Coffee House: risk management.

Conclusion

Despite promising prospects, prediction markets still face many challenges. First, regulatory boundaries remain uncertain—while the CFTC has established jurisdiction, enforcement varies by state. Second, liquidity fragmentation makes it difficult for long-tail prediction events to gather funds as large as major elections or World Cups.

However, capital inflows are accelerating solutions. By 2025, behind Polymarket and Kalshi stand top institutions like NYSE parent companies and Sequoia Capital. Robinhood’s entry signals that once user experience is simplified to stock trading levels, the user base could expand from millions of crypto users to hundreds of millions of traditional stock investors. The “trillions of dollars” potential market Vlad Tenev predicts may not be just a dream.

From Lloyd’s Coffee House’s ship insurance to on-chain real-time global event betting, humanity’s desire to “know the future” has never waned. Only the tools have changed—blockchain removes trust costs, enabling global wisdom to flow freely on transparent, permissionless protocols. When assets worth $50 billion are already pricing “truth,” are you betting on the outcome, or on the future itself?