The Last Look…
Posted by Colin Lambert. Last updated: March 23, 2026
I predict a riot.
What begins with a K and is valued at $22 billion? In a business that handles nearly ten trillion dollars-worth of trades each day, the valuations in prediction markets might seem a touch insane.
Prediction markets are America’s answer to Paddy Power, except with more liquidity for bets such as the return of Jesus and the exact timing for an ever-imminent alien invasion. Last week, Kalshi, one of the major prediction market operators, announced that it’s valued at $22 billion as part of its $1 billion fund raise, which saw the value of the platform double compared with its late 2025 price tag of $11 billion.
Its nearest competitor, Polymarket, is also worth a cool $9 billion, according to the numbers published in October last year when the Intercontinental Exchange (ICE) invested $2 billion. Reports indicate that a new funding round could be imminent, with a valuation of around $20 billion. In early 2024, Polymarket’s value stood around $350 million.
These price tags and the level of growth must seem extraordinary for the operators of FX platforms, many of which struggled to hit the $1 billion mark despite being market places for a much larger overall pool. Estimates for prediction markets put volumes around $60 billion with some expecting the pie to grow to $300 billion.
Retail FX markets, meanwhile, are an over $300 trillion a month market, and both use similar instruments, leveraged contracts such as CFDs or binary options to express bets. This hasn’t gone unnoticed in some quarters, such as ESMA. The regulator recently warned that leveraged instruments such as perpetual futures – the most traded contract in crypto – are often classified as CFDs and therefore should be treated as such from a regulatory perspective. Binary options, the marketing and sale of which is banned to retail investors in the EU, are downright prohibited due to their risky natures.
This doesn’t bode well for the long-term future of these trendy market places. Neither does their liquidity profile. While volumes can appear significant in isolation, they’re dwarfed by platforms that offer options, for example. Overall volumes across platforms spiked to above $2 billion a week around the 2024 US election, but by the start of this year they were in the range of $500mn-$800mn, despite significant news flow and spiking event risks. While options markets have thrived, predictions wilted. There have been some $1.76 billion worth of bets wagered on the Superbowl, with predictions markets managing to capture less than 4% of legal betting activity around the event.
One of the main reasons is the overwhelmingly retail participation mix and structural hurdles that are preventing institutional adoption, such as concerns about price manipulation. The participation mix is evident in trade sizes: 75% of users trade under $100 and only 3% exceed $1,000. When considering that these markets want to compete with established options markets directly, it’s easy to see that the latter has superior liquidity, not least due to the presence of larger, institutional players.
The retail dominance also means that sharp moves in underlying asset prices also create execution gaps, as prediction market liquidity evaporates due to the lack of professional risk takers.
This is unlikely to change, partly because of the nature of the product being short-term bets that don’t encourage complex strategies. All of these issues are exacerbated on weekends and holidays when manipulation risks spike in thin liquidity conditions.
Kaiko says that the most promising space for these platforms might be for long-tail events where traditional markets lack depth. For example, wagering that China reverses its ban on Bitcoin and offering 20x upside is an area where options markets are not offering efficient alternatives. The problem is, there is limited appetite for such bets.
“Until prediction markets either dominate long-tail event pricing or achieve meaningful adoption beyond headline events, they remain a VC-funded trend. They’re a cool gimmick with genuine applications, but the data doesn’t support current valuations when stacked against mature derivatives markets already serving most of their supposed use cases,” Kaiko said.
This is good news for FX markets in the long run. Shame about the valuations, though.
