Prediction Markets as the Next $10T Asset Class: Strategic Entry Points for Institutional Investors

The financial landscape is on the brink of a seismic shift. Prediction markets, once dismissed as niche tools for speculative gamblers, are rapidly evolving into a $10 trillion asset class by 2030. With trading volumes surging past $2.3 billion weekly in October 2025 and platforms like Kalshi and Polymarket attracting institutional capital at unprecedented rates, the infrastructure is now in place for a paradigm shift in how markets aggregate information and price risk. For institutional investors, the question is no longer if to enter this space but how to position for exponential growth while navigating the unique challenges of a fast-evolving ecosystem.

The Catalysts for Growth: Regulatory Clarity, Tech, and Institutional Confidence

Prediction markets have thrived in 2025 due to three interlocking forces: regulatory clarity, technological innovation, and institutional validation. The U.S. Commodity Futures Trading Commission's classification of event contracts as regulated derivatives has provided a legal framework for platforms like Kalshi to operate under Wall Street's scrutiny. This regulatory shift has unlocked access for institutional players, with Kalshi securing $1.4 billion in institutional capital in Q2 2025 alone. Meanwhile, blockchain infrastructure has reduced transaction costs and increased transparency, enabling real-time settlement and global participation.

The result? A surge in liquidity. By November 2025, Kalshi commanded 54% of weekly trading volume, with $2.1 billion in notional value, while Polymarket reported cumulative volumes exceeding $20 billion. These figures are not just metrics-they signal a structural transition from retail speculation to institutional-grade markets.

Strategic Entry Points for Institutional Investors

For institutions, the key lies in leveraging prediction markets as both speculative tools and risk management instruments. Here are three actionable strategies:

1. Arbitrage Between Prediction Markets and Traditional Derivatives
   Prediction markets often outperform traditional derivatives in forecasting macroeconomic events. For example, as of 2025, prediction markets priced a 62% probability of OPEC production cuts, compared to 55% in options-implied probabilities from Deribit, creating an 8% arbitrage spread. Institutions can exploit these discrepancies by hedging in traditional markets while taking directional bets in prediction platforms.

2. Macro Risk Hedging and Scenario Planning
   Prediction markets aggregate real-time probabilities for events like interest rate hikes, election outcomes, and GDP surprises. For instance, prediction markets priced a 61% implied chance of a U.S. recession in 2025Q2, a signal institutions can integrate into macroeconomic models. By treating these probabilities as dynamic inputs, investors can adjust portfolios proactively rather than reactively.

3. Capitalizing on AI-Driven Predictive Intelligence
   Platforms like Kalshi and Polymarket are partnering with AI firms to enhance predictive analytics. For example, Crypto.com and Signal Markets are developing tools that translate prediction market data into actionable insights for algorithmic trading. Institutions with access to these tools can gain a first-mover advantage in identifying mispriced events before they ripple through traditional markets.

Navigating Challenges: Liquidity, Infrastructure, and Regulatory Nuance

Despite the optimism, challenges remain. Prediction markets still face liquidity constraints compared to traditional derivatives, though this is rapidly improving. Kalshi's $2.1 billion weekly volume in November 2025 suggests that liquidity gaps will narrow as institutional participation grows. Additionally, back-office infrastructure-such as clearing and custody solutions-must evolve to support large-scale institutional flows.

Regulatory risks also persist. While the CFTC's oversight provides clarity in the U.S., global harmonization remains a work in progress. Institutions must prioritize platforms with robust compliance frameworks and diversify geographically to mitigate jurisdictional risks.

The Road to $10 Trillion: A Timeline and Call to Action

Experts project that prediction markets could reach $10 trillion in notional value by 2030, driven by three factors:
- Institutional Adoption: With nearly half of proprietary trading firms evaluating prediction markets in 2025, and platforms like Robinhood and Intercontinental Exchange (ICE) entering the space, institutional capital inflows will accelerate.
- Mainstream Integration: Partnerships with media outlets (e.g., CNN and Kalshi) and corporate entities using prediction markets for strategic planning will normalize their use.
- Technological Scalability: Blockchain's role in reducing friction and enabling global participation will ensure these markets scale beyond their current $27.9 billion trading volume in 2025 according to crypto research.

For institutions, the window to enter at the early stages is closing. The $10 trillion opportunity is not a distant dream but a trajectory already in motion. By adopting a dual strategy of arbitrage, hedging, and AI integration, investors can position themselves to capitalize on this next-generation asset class before it becomes as ubiquitous as equities or bonds.