Prediction Markets: Beyond Hype – Why Infrastructure Will Define the Sector's Future

The prediction market sector, once dismissed as a niche experiment in blockchain finance, is now a $10 billion industry, driven by platforms like Polymarket and Kalshi. These platforms have shattered trading volume records in 2025, with Kalshi reporting $4.4 billion in October alone and Polymarket not far behind at $3.02 billion, according to a CoinLaw analysis. Yet, as the sector scales, a critical question emerges: Can infrastructure keep pace with demand?

The Scaling Challenge: Liquidity, Governance, and Regulation

While Polymarket and Kalshi have captured headlines with their explosive growth, they face structural bottlenecks. Liquidity fragmentation remains a persistent issue, with most trading activity concentrated in high-profile markets (e.g., U.S. elections, major sports events), leaving niche markets unstable, as noted in a KuCoin Ventures report. For example, Kalshi's recent $1.1 billion spike in sports betting between October 20–27 highlights this imbalance, according to the CoinLaw analysis. Meanwhile, governance challenges persist, particularly for Polymarket, which settled with the CFTC and faced an FBI raid in 2024 before the DOJ closed its investigation under the Trump administration, according to a Wired article.

Regulatory uncertainty further complicates the landscape. Truth Social's new prediction market, Truth Predict, launched in partnership with Crypto.com, underscores the political entanglements in the sector. Donald Trump Jr., a strategic advisor to Kalshi and Polymarket's board member, sits at the intersection of these platforms and regulatory policy, according to the Wired article. This overlap raises concerns about conflicts of interest and uneven enforcement.

Infrastructure as the Key to Mainstream Adoption

The real opportunity lies not in the platforms themselves but in the infrastructure enabling them. Three pillars-protocols, oracle solutions, and compliance tools-are critical to addressing scalability and legitimacy:

1. Oracle Solutions for Real-Time Data
   Platforms like Polymarket and Kalshi rely on oracles to verify real-world outcomes. Polymarket's partnership with Chainlink now enables 15-minute settlements on Polygon, while Kalshi's integration with Solana and Coinbase's Base expands its technical reach, according to a CryptoTimes report. These collaborations ensure faster, more accurate market resolution, a necessity for attracting institutional investors.

2. Compliance Tools for Regulatory Resilience
   Chainlink's Onchain Compliance Protocol (OCP) allows smart contracts to enforce KYC/AML policies by storing identity data onchain, according to a Chainlink platform post. For platforms like Kalshi, which operate in a politically charged regulatory environment, such tools are essential to avoid the pitfalls that plagued Polymarket in 2024, as noted in the Wired article.

3. CLOB Dynamics for Liquidity Stability
   A Central Limit Order Book (CLOB) could revolutionize liquidity management. As noted by KuCoin Ventures, CLOBs centralize liquidity across markets, reducing volatility in niche bets and attracting both retail and institutional traders, according to the KuCoin Ventures report. For instance, a CLOB could stabilize markets for obscure sports events or local elections, which currently lack sufficient depth.

Strategic Investment Opportunities

The infrastructure layer is already attracting heavy capital. Polymarket's rumored $2 billion investment from Intercontinental Exchange (ICE)-parent of the New York Stock Exchange-signals institutional confidence in its ability to scale, according to the CryptoTimes report. Similarly, Kalshi's $300 million raise at a $5 billion valuation, according to the CryptoTimes report, reflects demand for its Solana-based infrastructure.

Google Finance's integration of Kalshi and Polymarket data into its search functionality, according to a Bitget report, further validates the sector's mainstream potential. By 2025, prediction markets are no longer speculative-they're financial tools.

The Road Ahead

For investors, the lesson is clear: The future of prediction markets lies in infrastructure, not just platforms. While Polymarket and Kalshi dominate headlines, the real winners will be those building the protocols, oracles, and compliance frameworks that enable these platforms to scale sustainably. As the sector matures, infrastructure will define not just growth but also legitimacy in a world where regulatory scrutiny and liquidity demands are only increasing.