Rapid Market Expansion and Rising Institutional Involvement
A recent report released by Citizens Bank on February 25 shows that the annualized revenue of the prediction market has surged from over $2 billion in December 2023 to more than $3 billion today. Analysts forecast that by 2030, this figure could surpass $10 billion.
From Gambling to Financial Infrastructure
What once began as niche betting platforms has evolved into a financial ecosystem that reflects the probabilities of real-world events. This transformation has drawn significant attention from traditional financial institutions and regulators, positioning the market as a new channel for capital flows and risk hedging.
Institutional Capital Enters, Driving Structural Improvements
- Trading volume increased by more than 40% in January compared to December, with similar growth rates sustained into February.
- Sports-related events remain the primary source of liquidity, but trading interest in macroeconomic, political, and regulatory outcomes is growing rapidly.
- Analysts note that the market is following a familiar pattern—evolving from retail-driven liquidity to professional market-making and now to institutional capital participation.
New Hedging Tool for Event-Driven Risks
Prediction markets enable investors to hedge risks tied to specific events such as inflation surprises or merger approvals without relying on proxy instruments like index futures or options, thereby reducing basis risk. By isolating individual outcomes, they offer precise risk transfer mechanisms and real-time, capital-weighted probability signals.
Infrastructure Maturity Paves the Way for Diversified Revenue Streams
As institutional involvement grows, improvements in data integration, liquidity provision, and settlement standards are becoming evident. Analysts expect that as the infrastructure matures, direct trading volumes will expand. While current revenues are primarily transaction-driven, future growth is expected to stem from data analytics, research, and financing services.