In June 2025, Kalshi, a regulated prediction market exchange in the U.S., secured $185 million in a Series-C funding round led by Paradigm, placing its valuation at an impressive $2 billion. This influx of capital aims to enhance its integration with stockbrokers, attract more market makers, and expand its range of ‘always-on’ markets to keep users engaged. Prediction markets, where users speculate on future events, are evolving as viable financial instruments. They are no longer confined to major events but are becoming an integral part of trading platforms like Robinhood and Webull, which now offer these markets directly in their applications.
The interest in prediction markets isn’t just limited to U.S.-based Kalshi. International platform Polymarket is reportedly closing a $200 million funding round at a $1 billion valuation, spearheaded by Founders Fund. In addition, Polymarket’s acquisition of the CFTC-licensed exchange QCEX for $112 million marks a significant step towards re-entering the U.S. market. The acquisition of established infrastructure signals Polymarket’s strategic bypass of the extensive regulatory processes that Kalshi endured, paving a smoother path to U.S. operations.
Kalshi’s valuation leads despite Polymarket’s higher trading volume in global events. This discrepancy highlights Kalshi’s regulatory advantage in the U.S., where its CFTC approval facilitates broker distribution and access to institutional liquidity, underscoring the platform’s current edge.
Since launching on Robinhood in March 2025, Kalshi has reached 25 million users, generating around $1 billion in traded event contracts during the second quarter. Webull has since followed suit, and Coinbase is also considering integrating prediction markets, suggesting potential access to over 100 million global users. This broker-led reach contrasts with the traditional sportsbook approach, such as that of FanDuel, which spent years building a user base through state-specific licensing. Kalshi, by utilizing existing brokerage accounts, achieves similar reach almost instantaneously.
Professional market makers play a crucial role in this expanding arena. Susquehanna International Group, which trades over a trillion dollars in ETFs annually, established Kalshi’s first dedicated event contracts desk in 2024. These market makers ensure seamless execution and higher bet limits, which are essential to attract professional traders. Kalshi’s Market Maker Program, complemented by Polymarket’s liquidity initiatives, underscores the platforms’ focus on boosting market depth.
Despite their growth, prediction markets remain at the nascent stage compared to traditional derivatives like Brent Crude Futures, known for capturing geopolitical risks through extensive daily turnovers. Prediction markets excel in engaging retail traders, evident as Polymarket’s contracts appear on mainstream financial channels like CNBC, although achieving widespread institutional participation remains a future milestone.
Regulatory hurdles persist, particularly for Kalshi, as sports now account for a significant portion of its trading volume. With sports dominating over 65% of Kalshi’s trades recently and the NFL season underway, the volume is expected to rise. Critics point to Kalshi operating akin to a sportsbook without the associated tax and licensing responsibilities. This has led to state gaming regulators issuing cease-and-desist orders, although federal judges have mostly ruled in favor of CFTC-regulated derivatives overriding state gaming laws.
In a strategic move, FanDuel announced a collaboration with derivatives giant CME Group to launch regulated event-based financial contracts, allowing users to bet on equity indices, commodities, and key economic indicators. This marks a significant shift, as traditional operators begin to explore the prediction market space.
AI technology is significantly enhancing the prediction market experience. Platforms like Polymarket and Kalshi have partnered with xAI to provide users with instant AI-generated market analysis, offering market history, drivers, and potential future catalysts. These integrations allow users to make more informed trading decisions and expose prediction markets to a wider audience.
While prediction markets have gained momentum, they remain limited by their binary nature. Recent filings indicate Kalshi’s plans to introduce prop markets and point spreads, although replicating high-margin products like parlays or casino games remains out of reach. Despite this, prediction markets offer a unique advantage in customer acquisition, attracting users who might not typically engage with traditional gambling platforms.
As sports remain central to prediction markets, they continue to capture a share of straightforward betting markets, offering value through price discovery and enhanced liquidity. However, as users seek more complex wagering options, traditional operators stand ready to provide broader gaming experiences, reinforcing the notion that prediction markets, while competitive, expand the betting landscape. They present new opportunities for operators and technology providers prepared to meet the evolving demands of a growing user base.
Waterhouse VC, a fund specializing in the wagering and gaming sectors, continues to invest in this evolving market. Since its inception in 2019, the fund has achieved a remarkable gross total return of +3,597%, underscoring its focus on innovation and growth within the industry.
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