The news: Prediction market companies were valued at billions of dollars in 2025, per Bloomberg News. Polymarket raised $2 billion in October, valuing it at $9 billion, while Kalshi raised $1 billion in December, valuing it at $11 billion.

Meanwhile, Robinhood noted that about 2.6 billion event contracts—derivatives that let traders bet on the outcome of a specific event—were traded in December, compared to 179 million options contracts. Robinhood and trading firm Susquehanna operate their own prediction market through a joint venture that competes with Kalshi, which is a Robinhood partner.

How it works: An event contract’s price (between 1 and 99 cents on Robinhood) reflects the market’s implied probability of the event happening. At settlement, a correct contract pays out $1, and an incorrect one pays $0. These contracts are traded on derivatives platforms that provide the infrastructure for prediction markets.

Zoom out: The second Trump administration overwhelmingly supports prediction markets, after the Biden administration scrutinized them intensely. Some states are seeking to bar prediction markets from operating within their borders, with at least 10 taking legal action against Kalshi.

Our take: Prediction markets are attracting outsized capital and participation despite unresolved legal risks, raising concerns about market froth. The sector’s rapid expansion echoes the aggressive risk-taking that preceded crypto’s collapse in 2022.

Gen Zers’ interest in alternative assets for their investment portfolios—as outlined in our September 2025 report Winning the Great Wealth Transfer—makes event contracts a natural draw. But these products introduce greater complexity and untested risk than spot crypto, increasing the likelihood of a new bubble forming.