Published on: December 15, 2025, 08:00h.
Updated on: December 14, 2025, 10:00h.
- Analysis suggests a potential revenue opportunity exceeding $10 billion by 2030.
- Event contracts present distinct advantages for institutional investors.
- These contracts eliminate inefficiencies tied to trading “discrete events” such as economic reports.
Prediction markets are already on track for a $2 billion run-rate due to transaction fees, with projections indicating an increase to $10 billion by 2030.
This optimistic projection comes from a team of analysts at Citizens, led by Devin Ryan, estimating that around $400 million of the current $2 billion is driven by Robinhood Markets (NASDAQ: HOOD), making yes/no contracts the brokerage’s fastest-growing segment. The firm notes that the average monthly volume for prediction markets is close to $10 billion, which, while modest compared to the $10 trillion in domestic equities, indicates potential for substantial growth.
“As volumes grow and spreads narrow, the fee structure remains appealing given the near-zero costs associated with listing and settlement,” Ryan notes. “Looking forward, the exposure to event-sensitive markets exceeds $500 trillion, and even with conservative early estimates, this suggests a pathway to hundreds of billions in notional value and a revenue opportunity exceeding $10 billion annually over the next five years as markets grow to trillions of contracts.”
If these estimates hold true, they could significantly validate the lofty valuations assigned to companies like Kalshi and Polymarket, numbers that have raised eyebrows in the market.
Institutional Applications Drive Prediction Markets Expansion
The rise of prediction markets can largely be attributed to their innovation in sports betting models, especially in regions where traditional betting is restricted. However, the utility of yes/no contracts is enticing institutional traders, which is likely to enhance liquidity and revenue within prediction markets.
Professional traders have traditionally used derivatives such as exchange-traded funds, options, and swaps as hedging tools. Yet, choices regarding deal-making, geopolitical developments, and other specific events have often been limited. Prediction markets effectively address this need.
“Event-focused hedge funds can pinpoint outcomes related to deals, litigation, and regulatory actions without the risk associated with beta or duration; macro funds can directly hedge against inflation readings, policy shifts, and geopolitical events; quantitative firms can leverage probability curves as vital indicators; and corporate entities can utilize markets for strategic timing in capital raises, planning, and investor relations,” the Citizens team asserts.
In addition to hedge funds, quantitative trading firms and corporations may increasingly adopt prediction markets, especially to hedge against events like litigation, mergers, and regulatory activities.
‘Foundational Stage’ of Prediction Markets
The discussion about institutional applications and total market size is important since, as noted by Citizens, the current landscape of prediction markets is primarily dominated by retail traders. Nonetheless, the sector is experiencing rapid growth, “uncommonly seen in emerging financial products.”
The research firm estimates that in November, Kalshi and Polymarket—leaders in the prediction market space—together processed $10 billion in notional volume across approximately 15 billion to 20 billion contracts. Meanwhile, Robinhood processed 5.5 billion event contracts during October and November.
Historically, the adoption of prediction markets among professional traders is promising. For example, when equity options were introduced 52 years ago, they achieved around five basis points of the underlying market capitalization, similar to credit default swaps (CDS) and interest rate swaps.
“We believe these metrics illustrate the inherent challenges of institutional adoption, taking into account documentation, risk assessments, capital treatment considerations, liquidity evolution, and operational preparedness,” concludes the research team. “That said, employing a comparable early-adoption ratio to the $500 trillion-plus event-exposed domain indicates a conservative initial institutional opportunity of roughly $250 billion-$500 billion.”