Growth in prediction markets is surging as traders seek more precise ways to price and hedge discrete events, from elections to rate decisions, without relying on blunt proxy trades.

Prediction markets are running at an annualized revenue rate above $3 billion, up from about $2 billion in December, and could reach $10 billion by 2030, according to a Monday report by U.S. bank Citizens.

The bank cited accelerating volumes, stronger market structure and early institutional engagement, saying the trajectory mirrors the early evolution of listed derivatives and digital assets.

"We continue to view ~$10 billion of annual industry revenue by 2030 as a reasonable medium-term waypoint rather than an end state," wrote analysts led by Devin Ryan.

Prediction markets have rapidly moved beyond niche betting to a growing ecosystem of sophisticated trading platforms that aggregate real-world event probabilities. Leading players include Kalshi, a CFTC-regulated U.S. exchange for event contracts, and Polymarket, one of the largest decentralized markets covering politics, sports and economics. These platforms are drawing significant volume and attention from mainstream finance and regulatory bodies alike, reflecting broader growth and the shift toward institutional relevance.

Asset classes typically scale from retail-led liquidity to professional market makers and, eventually, institutional capital, driving a step-change in depth and sophistication, the analysts said, arguing prediction markets are following that path.

January volumes rose more than 40% from December, with February tracking at a similar pace despite expectations of a post-football slowdown. While sports remain a key liquidity driver, activity is broadening into macroeconomic, political and regulatory events, areas more aligned with institutional demand.

Prediction markets allow investors to hedge discrete event risk, from inflation surprises to M&A approvals, without relying on proxy instruments such as index futures or options, reducing basis risk. By isolating specific outcomes, they provide targeted risk transfer and real-time, capital-weighted probability signals, Citizens said.

Institutional participation is emerging first through data integration, liquidity provision, settlement standards and regulatory clarity, with direct trading expected to scale as infrastructure matures. While revenues today are largely transaction-driven, the bank's analysts see growth in data, research and financing services as the ecosystem develops.

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