According to ARK Investment Management, the notional volume of prediction markets could skyrocket tenfold, potentially reaching an astonishing $5 trillion within the next three to five years.
This projection significantly surpasses even the most optimistic scenarios, which estimate that turnover in all-or-nothing exchanges will reach around $1 trillion by 2030. ARK emphasizes that prediction markets are becoming mainstream, citing recent reports that Meta Platforms, the parent company of Facebook, is developing its own yes/no platform. They further note that established players could face disruption unless they invest strategically to claim a share of the anticipated volume growth.
“Kalshi has transitioned from nearly zero market share two years ago to approximately 68% of weekly notional volume today, primarily due to its regulatory compliance in the US,” states ARK analyst Nicholas Grous. “Since mid-2024, Polymarket’s market share has plummeted from 97% to around 25%, indicating that existing operators can lose market share during successive event cycles, and those developing the necessary infrastructure for upcoming events are better positioned to gain.”
Based in Florida, ARK is an investor in the privately held Kalshi.
ARK Predicts Evolution of Prediction Markets Beyond Sports
A recent report from Jefferies highlights an 80% increase in prediction market volumes last month, with 89% of this growth coming from sports derivatives or sports-related combo bets, also known as parlays, validating that events like the World Cup are advantageous for yes/no exchanges.
While ARK’s Grous acknowledges the significant impact of the soccer tournament, he emphasizes that the firm’s volume forecast extends beyond sports. It fully considers potential growth opportunities in various other event contracts.
“We believe most growth will not stem from sports but will arise from financial, economic, and political contracts that grant retail investors direct exposure to tangible outcomes,” adds the analyst.
Apart from sports, retail investors are showing increasing interest in political derivatives, suggesting that a new wave of volume growth for prediction markets may be on the horizon as the November midterm elections approach.
The Importance of Infrastructure Maturity
While a $5 trillion target may seem modest in relation to the predicted trajectory of the broader global derivatives market, it represents a monumental figure for prediction markets today.
Achieving this milestone requires substantial infrastructure investments, which explains why companies like DraftKings are integrating exchange functionalities internally and why established firms like Polymarket collaborate with traditional financial exchange operators.
“As infrastructural capabilities mature, and if institutional investment begins to grow substantially, the market potential could be transformative, especially considering an estimated future total of around $900 trillion in notional volume within the financial derivatives market,” concludes Grous.