Persistent demand, cultural visibility, clear regulations, and mature infrastructure predict that the prediction market will be the hottest investment track for VCs in 2025.

Author: Yogita Khatri

Translation: Deep Tide TechFlow

The prediction market is in its golden age.

The Clearing Company, founded by former employees of Polymarket and Kalshi, has just completed a $15 million seed round funding—this amount is quite substantial for a first round of financing.

Kalshi's valuation reached $2 billion after a $185 million funding led by Paradigm in June and has been actively expanding, from hiring crypto executive John Wang to partnering with Robinhood to develop a football market. Reports indicate that Polymarket is raising over $200 million, led by Peter Thiel's Founders Fund, with a valuation of $1 billion. Previously, Polymarket had raised over $100 million, including an undisclosed $50 million funding earlier this year, and is reportedly re-entering the U.S. market after acquiring the derivatives exchange QCEX for $112 million.

Meanwhile, Crypto.com and Underdog are launching sports prediction markets in 16 U.S. states; reports suggest that Coinbase is exploring its own prediction platform; X has designated Polymarket as its official prediction partner; xAI is integrating Grok into Kalshi.

Overall, these latest developments indicate that the prediction market has moved from the margins to the spotlight.

The numbers tell the same story. My colleague Ivan Wu provided data from The Block Pro's funding dashboard, showing that 2025 will be the strongest year for the prediction market to date, with 11 transactions raising over $216 million. Prior to this, the funding amount for 2024 was $80 million, and for 2021 it was nearly $60 million, while funding activities in previous years were sparse.

The reason prediction market platforms are attracting more venture capital this year is that old assumptions have been shattered. After the U.S. elections last November, trading volume did not decrease but shifted towards sports, economic, and cultural events. "This sustained interest has rekindled many venture capital firms' confidence in investing in this market," said Michael Hua, partner at 1kx (online name Mikey0x). Hoolie Tejwani, head of Coinbase Ventures, went further to call the prediction market a "killer on-chain application," stating that it has proven a robust product-market fit.

Regulatory breakthroughs have further enhanced this momentum. In May 2025, the U.S. Commodity Futures Trading Commission (CFTC) withdrew its appeal against Kalshi, effectively affirming a federal court ruling that allows election contracts—Kyle Samani, managing partner at Multicoin Capital (an investor in Kalshi), stated that this turning point has pushed the prediction market into "mainstream awareness." Just last week, the CFTC also approved Polymarket's return to the U.S. market through the acquisition of QCEX and issued a no-action letter regarding record-keeping for event contracts. Brandon Potts, partner at Framework Ventures, noted that this move demonstrates that regulators are now willing to engage constructively.

Behind all this is years of infrastructure development. Alexander Pack, co-founder and managing partner of Hack VC, stated, "The prediction market needed over a decade of infrastructure improvements to truly achieve a leap in application." He mentioned that smart contracts, secure oracles, stablecoins, and regulatory support are all key factors.

Overall, persistent demand, cultural visibility, regulatory clarity, and mature infrastructure—these factors have collectively made the prediction market a more valuable investment area today.

Advantages of Polymarket and Kalshi

If "why now" can explain the funding boom in the prediction market, a more difficult question is why only Polymarket and Kalshi have been able to stand out. Most competitors—whether on-chain experiments or niche platforms—remain marginalized.

Liquidity may be one of the decisive factors. Kyle Samani, managing partner at Multicoin Capital, described it as a "chicken or egg" problem that cannot be solved without patience and funding. Kalshi spent five years building liquidity before favorable market conditions arrived, giving it what Samani calls a "huge moat." Polymarket, on the other hand, promotes liquidity by distributing hundreds of thousands of dollars in cash incentives each month, especially during elections, a strategy that Michael Hua of 1kx considers crucial. Additionally, Kalshi benefits from its associated market-making institutions, which help deepen trading volume across multiple contracts, Hua added.

Marketing and market awareness also provide these two platforms with lasting competitive advantages. Rob Hadick, a partner at Dragonfly, stated that Polymarket "has become synonymous with the concept of prediction markets," noting that it has become the preferred source of information for journalists, politicians, and business leaders, while its high-profile collaboration with the X platform further enhances its influence. Kalshi, meanwhile, focuses on building institutional credibility, partnering with companies like Robinhood, and establishing a reputation as a regulated financial platform. Hadick pointed out, "Other prediction markets are either too early or too niche and have yet to find a true product-market fit, while the market size is currently insufficient to support more than two scaled players."

Persistence is equally crucial. Alexander Pack of Hack VC stated that these two platforms have not given up in the face of regulatory pressure and thin trading volumes. The first-mover advantage combined with survival capability ultimately translates into market dominance, giving them brand influence, liquidity, and distribution capabilities that competitors find hard to match.

The Future of Prediction Markets

The next phase of prediction markets may present a pattern of "top concentration, marginal expansion." Rob Hadick, a partner at Dragonfly, likened its structure to exchanges: a few leading players dominate, but small, niche, or regional competitors still have room to survive. He believes the potential in this field is "immense," with the only limitation being users' willingness to bet on outcomes. Kyle Samani of Multicoin Capital went further, stating that prediction markets have the potential to rival the stock market by allowing people to trade events directly, "there's no reason this field can't be bigger than the stock market."

Institutional adoption may accelerate this process. Colton Conley, a partner at Arrington Capital, anticipates that hedge funds and other institutions will utilize prediction markets as direct hedging tools, thereby enhancing liquidity and improving accuracy. Prithvir Jhaveri, co-founder and CEO of FactCheck, expects that popular sports platforms like FanDuel and DraftKings will eventually join in—he believes this shift could bring "hundreds of billions" in revenue to the industry. FactCheck aims to create the "Hyperliquid of prediction markets."

Product design is also crucial. Hoolie Tejwani from Coinbase Ventures stated that they have made "multiple" investments in this area and believe that user-generated markets, on-chain liquidity, and trust-minimized outcome resolution mechanisms will be the biggest breakthroughs. Alexander Pack from Hack VC reminded that although infrastructure has made progress, the scale of prediction markets is still just a small part of crypto trading, and the grander vision—such as corporate decision-making and "predictive democracy" (Futarchy)—remains out of reach. Predictive democracy, proposed by economist Robin Hanson, refers to a form of government governance where elected officials define the metrics of national well-being and use prediction markets to forecast which policies are most likely to improve those metrics.

Risks and Challenges

Despite the thriving prediction market, challenges lie ahead. Liquidity remains fragile, especially for smaller platforms. Hadick pointed out that the outcome resolution mechanism is a structural weakness—many events are not entirely objective and rely on oracles or arbitrators, which can lead to disputes. He warned that this design could result in "incentive misalignment or issues," but he also noted that over time, market makers will gradually adapt to prediction markets, just as they have in the sports betting sector.

Reputational risks cannot be overlooked. An anonymous investor pointed out that "bad actors" could create markets around socially harmful outcomes like war or terrorism, which could provoke public backlash and regulatory crackdowns. Michael Hua also highlighted integrity issues, such as "toxic liquidity and insider trading," which could deter market makers and harm user experience, especially on crypto-native platforms that do not require identity verification (KYC).

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。