Prediction markets have spent years as an esoteric instrument used most often by economists, political scientists, and a small contingent of sophisticated traders who knew you could read contract prices as a set of signals about probabilities. That era seems to be fading. A recent refresh of platform data suggests that real-money prediction market participation has been rising rapidly among American adults, fueled by the mainstreaming of platforms like Kalshi and Polymarket, the extraordinary visibility of the election markets in 2024, and a growing culture of probabilistic thinking about current events.

Using registration data from the platforms, trading volume disclosures, and third-party audience research, industry estimates suggest that approximately 8% of American adults have made at least one real-money trade on a prediction market platform – a number that would have sounded downright nuts in 2022. Those rates go up substantially among adults under 35, meaning engagement with the concepts of probabilistic forecasting and prediction markets may be millennial and Gen-Z-specific.

What the Data Shows

A large body of literature has been written on this topic. The same themes appear repeatedly in the literature. Based upon the literature there appears to be agreement on what types of individuals are involved in prediction markets and how they interact with these markets.

Key findings from all of the various data sets presented are as follows:

1. ~8 percent of adults in the U.S. have made a wager or otherwise engaged in trading on a prediction market. This percentage varies significantly based upon gender; males represent ~12 percent, while females represent ~4 percent.
2. Adults ages 18-34 exhibit the highest levels of participation in prediction markets at a level of approximately ~14 percent. This represents almost a doubling of the participation rates seen amongst adults aged 55+ (~5 percent).
3. Politics/elections represent the most frequently traded category of contracts within the prediction market space, as stated by the overwhelming majority of survey respondents utilizing each of the various platforms utilized to engage with prediction markets.

The Regulatory Turning Point

In order to understand why there is an increase in the number of participants in prediction markets, it is necessary to first understand what has changed legally. Prior to 2024, real money prediction markets existed in a very unclear legal environment within the United States. The Commodity Futures Trading Commission (“CFTC”) had jurisdiction over “event contracts,” but their application of this jurisdiction was very unpredictable. PredictIt, which is the oldest US facing political prediction market, operated on a no-action letter until that letter was withdrawn by the CFTC in 2022, prior to being reinstated through a lawsuit against the CFTC.

The political climate for real money prediction markets changed significantly when Kalshi prevailed in its court case against the CFTC in 2024; specifically that political event contracts are permitted for a CFTC regulated exchange to trade. This decision caused three immediate impacts to occur;

• That decision legitimized Kalshi’s political markets and enabled them to greatly expand their contract offerings.
• The regulatory clarity that this decision provided greatly increased investment in the area of prediction markets.
• This decision also encouraged several other companies to enter the US market more quickly than they may have otherwise done so. Specifically, Polymarket began more aggressively acquiring users from within the US and others began the process of registering with the CFTC.

Who Is Trading and Why

Prediction Markets vs. Sports Betting: A Blurring Line

The line between prediction markets and sports betting is legally important but practically very blurry. Sports betting is licensed at the state level; prediction markets are overseen at the federal level by the CFTC. A contract on who wins the Super Bowl from Kalshi and a Super Bowl futures bet from DraftKings are essentially the same financial product – but exist in entirely different regulatory environments, are taxed differently, and have separate account and payout processes. This regulatory bifurcation creates genuine confusion for consumers. Among users who have used both sports betting platforms and prediction markets, the majority have said they feel like essentially the same product. Among regulators and law scholars these distinctions are hotly contested.

What Comes Next

Prediction market participation at roughly 8% of American adults is meaningful growth from a near-zero base just four years ago – but the market remains early stage by almost any measure. A few developments will dictate how broadly participation scales from here.

The first is product simplification. Current contract interfaces are forbidding to users who have little experience with financial instruments. A platform that learns to simplify them – presenting a market as simply “Will X happen? Yes or No” – would expand their addressable audience far beyond the financially literate motivator-degenerate early adopter cohort that forms the bulk of current prediction market participation.

The second is mobile experience. Prediction market apps have improved considerably but remain far behind sports betting apps in polish – which have had years and hundreds of millions of investment going into optimising the mobile betting experience. Closing that user experience (UX) gap is an essential first step toward wider mass market involvement.

Thirdly, and potentially most importantly, the ongoing regulatory clarity. Once the CFTC’s regulatory structure has stabilized and there is certainty regarding the legality of the contract terms associated with the events being wagered on by users; this would open up significantly greater opportunities for low friction mainstream activity. Conversely if regulatory fragmentation occurs such as some jurisdictions banning certain types of contracts, states passing their own regulations concerning these activities and/or other regulatory bodies entering into the fray: widespread adoption will be limited regardless of the level of interest among potential customers.

Whether or not participation grows from its current estimated 8% to 15%, 20%, etc., over the next five years will depend far more upon regulatory and product structures’ ability to handle increased customer demand than it does on whether consumers wish to gamble via this type of platform: evidence exists that they do.