Polymarket in 2025: What’s Next for Prediction Markets and Investor Sentiment?

Prediction markets are no longer just niche instruments for trading on

events. In 2025, platforms like Polymarket have become powerful indicators of investor sentiment and market direction. With billions in annualized trading volume, these platforms are gaining recognition from institutional players and even traditional financial advisors. For retail investors, understanding how prediction markets work—and where Polymarket fits in—can offer a new lens through which to view macroeconomic and political trends.

What Is Polymarket and How Does It Work?

Polymarket is a blockchain-based prediction market platform that allows users to bet on the outcomes of real-world events. These events can range from macroeconomic indicators like inflation and interest rates to political elections, sports, and even corporate mergers. The platform uses USDC.e on the Polygon network for collateral and operates on a central limit order book model, similar to traditional trading platforms. Users can buy and sell Yes or No shares, with the maximum payout of $1 if the market resolves in their favor.

The platform's resolution process is governed by written rules and is often verified using UMA's Optimistic Oracle. This means that users can challenge outcomes if they believe they are incorrect, adding a layer of transparency and accountability to the system. Importantly, Polymarket is non-custodial, meaning users retain control of their assets at all times.

2025 Developments and Volume Growth

2025 has been a transformative year for prediction markets. By the end of the year, Polymarket and other platforms like Kalshi and DraftKings have collectively generated over $50 billion in annualized trading volume. In November 2025 alone, Polymarket saw $3.74 billion in trading volume, while Kalshi reported $5.8 billion in the same period. This surge in activity is partly driven by the rise of institutional participation and regulatory clarity from the CFTC, which has allowed these platforms to operate under a commodity swap framework.

Intercontinental Exchange (ICE) has even invested $2 billion in Polymarket, valuing the platform at $9 billion post-investment. This institutional backing signals growing confidence in the sector and highlights the potential for prediction markets to evolve into mainstream financial tools.

Key Events and Predictions on Polymarket

Several high-profile events in 2025 have drawn significant attention on Polymarket. For example, prediction markets on the direction of the CME settlement prices for Silver (SI) and Crude Oil (CL) futures on December 19, 2025 were among the most traded. These markets resolved based on whether the prices were higher or lower than the previous day's levels, using only the active month's settlement price published by CME Group.

Political markets have also remained a major draw. One of the most notable prediction markets in 2025 was on the outcome of the U.S. presidential election, with Polymarket's "Trump win" share priced at $0.60, implying a 60% chance of a Trump victory. The actual outcome of 312–226 in the Electoral College closely aligned with this prediction. This level of accuracy has led to increased trust in prediction markets as forecasting tools.

Regulatory Landscape and Institutional Adoption

The regulatory environment for prediction markets in the U.S. has been complex but evolving. The Commodity Futures Trading Commission (CFTC) has taken a relatively hands-off approach, allowing platforms like Polymarket and Kalshi to operate under the commodity swap framework. This has led to weekly trading volumes exceeding $2 billion by October 2025.

However, some states like Nevada, Connecticut, and New Jersey have challenged prediction market platforms as unlicensed gambling operations. This has led to legal setbacks and enforcement actions. For example, Kalshi secured a preliminary injunction in New Jersey but lost protections in Nevada. Coinbase has also sued Michigan, Illinois, and Connecticut to assert CFTC preemption, highlighting the ongoing tension between federal and state regulators.

Despite these challenges, prediction markets have seen increased adoption. DraftKings launched its prediction markets app in 38 U.S. states. The platform routes contracts through CME Group, the same exchange used by FanDuel, creating shared liquidity between competing platforms.

What It Means for Investors and Market Watchers

For investors, prediction markets can serve as leading indicators of market sentiment. For instance, Kalshi's 'Inflation in 2025' market showed a forecast increase from 3.05% to 3.58% before the April 10 CPI data was released. This outperformed traditional models like the Cleveland Fed's Nowcast. Prediction markets are increasingly used by hedge funds and traders to anticipate shifts in sentiment and position themselves accordingly.

Moreover, prediction markets are becoming a new asset class for some investors. Wealth managers have noted a change in investor behavior as more people allocate small percentages of their portfolios to these speculative positions. This trend is particularly visible among Robinhood users, who traded 2.5 billion prediction-market contracts in October 2025.

Looking Ahead in 2026

As we move into 2026, the prediction markets sector is expected to gain clearer institutional roles, similar to options and perpetual contracts. The White House has confirmed that the Digital Asset Market CLARITY Act will be taken up by the Senate in January 2026, aiming to clarify the classification of tokens between securities and commodities. This regulatory clarity could further boost institutional participation and innovation in the space.

Meanwhile, Polymarket traders are already placing bets on major macroeconomic outcomes. As of December 2025, traders assigned the highest odds to Bitcoin ending the year near $80,000, with a 26% chance of it finishing above $96,000. Given Bitcoin's current price of around $86,000 and weak technical indicators, this suggests a range-bound market ahead.

The growing influence of prediction markets is undeniable. As platforms like Polymarket continue to refine their models and expand their offerings, they are likely to play an even greater role in shaping market expectations and investor behavior in 2026 and beyond.