1. Track Background
Since the 2024 US election, which ignited the popularity of Polymarket, prediction markets have become a cutting-edge track of interest for both Web3 and traditional financial institutions. During the election, on-chain markets demonstrated faster and more accurate predictions than traditional polls, allowing the outside world to truly experience the power of "price equals probability." In 2025, this enthusiasm further evolved into a comprehensive upgrade in both capital and product levels. Since June, nearly ten related projects have secured funding, with investors including top institutions such as Coinbase, Paradigm, and Delphi. Behind this surge of capital lies the unique structural advantages of blockchain prediction markets: an open access mechanism significantly lowers the barrier to entry, all transaction records are transparent and immutable, and users can place bets with real money without relying on intermediaries. The final price naturally becomes a quantitative expression of collective wisdom.
At the same time, the development of prediction markets has also shown a diversified path. On the compliance level, Kalshi has obtained compliance licenses in all 50 states under the approval and supervision of the CFTC. Polymarket has acquired a regulated entity providing contract trading in the United States through the acquisition of QCX, a derivatives exchange in Florida. In terms of product innovation, projects such as Myriad and Flipr have embedded prediction scenarios into social media, allowing users to place bets directly through social media platforms such as X, thus socializing prediction betting. Limitless relies on the high-performance CLOB model of the Base chain to reshape the liquidity experience, while Drift attempts to combine predictions with high-leverage derivatives to expand more trading dimensions. Overall, compared to 2024, the prediction market track in 2025 has seen significant positive changes in compliance, model innovation, and usage scenarios. 2. Mechanism Characteristics of Prediction Market Projects The main mechanism characteristics of prediction market projects include transaction matching, contract form, liquidity, oracles, and other features. These mechanisms are key to the long-term sustainable operation of prediction markets. They can be roughly divided into the following categories: 1. Transaction Matching Model In prediction markets, the transaction matching mechanism directly determines market activity and price performance. Currently, there are two mainstream models: the order book model and the automated market maker model. Polymarket and Kalshi are typical representatives of the order book model. In this model, market makers or traders actively place buy and sell orders. When market liquidity is sufficient, this can speed up transaction execution and reduce slippage. However, when liquidity is weak, trading can easily lead to problems such as widening spreads and transaction difficulties. The automated market maker model is a second choice. The advantage of AMMs lies in their algorithmic automatic adjustment of trading pair prices, enabling transactions to be completed without a counterparty, thus maintaining continuous market trading capacity. However, slippage increases significantly when liquidity is extreme, and the mechanism is sensitive to parameters, potentially posing security risks. 2. Contract Design and Problem Definition In prediction markets, clarity in contract design and verifiability of judgment methods are crucial. Mainstream contract types include:
Binary Contracts: The most common form, these contracts pay a fixed amount (e.g., $1) if an event occurs and receive nothing if it doesn't. They are highly liquid and easy to price, making them widely used in scenarios with clear outcomes, such as elections and sports.
Categorical Contracts: These contracts are suitable for scenarios with multiple mutually exclusive outcomes. Traders can choose to bet on a specific outcome, such as predicting who will become the next CEO. Scalar/Index Contracts: Used to predict numerical changes, such as a company's quarterly revenue. The contract's payout varies with the resulting numerical value, and the price is multiplied by a multiplier to map the predicted target. 3. Oracles: Trusted judgment of event outcomes is a core component of the credibility of prediction markets. While traditional platforms rely on operators or third-party arbitration, crypto-native prediction markets incorporate oracle mechanisms to ensure on-chain contracts have access to reliable real-world data. For example, Polymarket uses the UMA Protocol to write real-world event results on-chain for automatic settlement. A robust judgment system not only reduces the risk of disputes and manipulation but also builds trust among users, thereby increasing market activity. 4. Other Key Factors: Beyond the underlying mechanism, the user experience of prediction markets is influenced by a variety of factors, including: underlying chain selection and transaction gas costs, the platform's user interface design, and the fee structure (market creation fees, transaction fees, etc.). These factors together contribute to the platform's overall competitiveness and play a decisive role in user retention and market expansion. 3. Analysis of Popular Projects: Polymarket. During the 2024 US election and numerous other key global events, Polymarket demonstrated its superiority in providing faster and more accurate predictions compared to traditional polls, gradually becoming a key source of information for media organizations and investors, and establishing its leading position in the prediction market. The platform leverages Polygon's Layer 2 network, offering low fees and high throughput to support market operations. It primarily utilizes a binary outcome market mechanism: users buy "yes/no" shares to bet on the future direction of political, economic, sports, and social events. According to PolymarketAnalytics, Polymarket's cumulative trading volume has exceeded $898 million, firmly ranking first globally. However, in terms of user numbers and open interest, Polymarket has been surpassed by Kalshi. This was primarily due to early compliance restrictions, which temporarily prevented US users from directly accessing the platform. However, this disadvantage was reversed in 2025, with the US Department of Justice officially concluding its investigation in July, allowing Polymarket to successfully re-enter the US market. Polymarket acquired QCEX, a CFTC-licensed derivatives exchange and clearinghouse, for $112 million, further addressing compliance concerns. Meanwhile, in June, Polymarket announced a partnership with Elon Musk's social platform, X, to combine its own prediction market data with xAI's Grok to launch a real-time prediction information feed service, further enhancing its influence in public opinion dissemination and market data applications. Currently, Polymarket's largest competitor is Kalshi. Leveraging its dual advantages of strict compliance and endorsement from Trump's son, Kalshi is gradually overtaking Polymarket's leading position and achieving significant breakthroughs in user growth and activity. Polymarket's core advantage lies in its on-chain operation, which inherently carries the potential for token issuance and provides additional incentives for users and early adopters. Polymarket has also achieved key regulatory compliance breakthroughs, removing a major obstacle previously hindering its expansion in the US market. With the combined strengths of blockchain and regulatory compliance, Polymarket's future development remains highly promising. Kalshi is the first prediction market platform to receive full regulatory oversight from the U.S. Commodity Futures Trading Commission (CFTC), holding licenses in all 50 states. This legal status not only enabled it to quickly gain trust among traditional investors and institutions, but also opened up a broader user base. Unlike most on-chain prediction markets, Kalshi's model allows users to directly trade the outcomes of real-world events, rather than indirectly betting on the prices of related assets. Its contract design primarily utilizes a binary "yes/no" format and covers a wide range of data, including macroeconomic data (such as inflation and unemployment rates), political elections, sporting events, and even cryptocurrency price trends. Kalshi's core competitive advantages lie primarily in compliance, capital support, and political connections. In terms of capital, the platform has secured backing from top investors such as Sequoia Capital, Paradigm, and Y Combinator, raising over $260 million in funding. Its latest valuation reached $2 billion, placing it at the top of its class. Regarding political connections, former CFTC Chairman candidate Brian Quintenz served on Kalshi's board of directors, and Donald Trump Jr. is a direct advisor, further strengthening the platform's public influence and compliance efforts. Leveraging its regulatory advantages and strong political capital, Kalshi has steadily established a competitive advantage over Polymarket. Limitless is an emerging prediction market platform built on the Base chain. It utilizes a CLOB (central limit order book) system, supporting limit orders, market orders, and multi-outcome contracts. This allows users to trade with the same flexibility as on a CEX while maintaining on-chain transparency and verifiability. The platform uses Python Network oracles for instant settlement, covering multiple markets including Bitcoin, Ethereum, stocks, and macroeconomics. All transactions are settled in USDC. To date, Limitless has accumulated approximately $299 million in trading volume, with V1 contributing approximately $291 million and V2 approximately $8.23 million, with total transaction fees of approximately $107,000. In July 2025, Limitless completed a $4 million strategic funding round with participation from Coinbase Ventures, 1confirmation, and other institutions. It is currently the largest prediction market on the Base chain. Myriad Markets is a decentralized prediction market protocol launched by media company DASTAN Inc., dedicated to deeply integrating on-chain prediction trading with digital content. The platform uses a Chrome extension to embed prediction portals directly into news, social media, and video content, enabling users to place bets while reading or watching. Myriad utilizes an AMM bonding curve model to support market liquidity, supporting binary, categorical, and scalar contracts, with settlement enabled by on-chain oracles. To date, the platform has processed 5.63 million transactions, with approximately 388,000 active USDC wallets and a total transaction volume of approximately $11.26 million. Myriad's core competitiveness lies in native content embedding and transparent on-chain settlement, providing a new monetization model for the media ecosystem while attracting highly engaged users to participate in multi-themed forecasts on topics such as politics, sports, cryptocurrency, and macroeconomics. Flipr is a front-end trading tool that deeply embeds prediction markets into the social platform X. Its core entry point is the trading bot, Fliprbot. Users can place bets on cryptocurrency prices, sporting events, macroeconomic events, and more simply by tagging @fliprbot in tweets or sending natural language commands in private messages, without having to navigate to a separate website. The platform integrates leveraged trading, stop-loss/take-profit functionality, and volatility protection. It also supports group chat and community integration, allowing predictions to naturally integrate into social interactions. The current price of $FLIPR is approximately $0.017, with a total market capitalization of approximately $17.21 million. Flipr's differentiated advantage lies in the fact that it does not directly compete with Polymarket or Kalshi on liquidity or regulatory compliance. Instead, it acts as a social front-end layered on top of existing markets, transforming prediction markets from specialized tools into visible, interactive social content, significantly lowering the barrier to entry for new users and increasing market reach. 4. Future Development The future development of the prediction market is likely to follow a dual trajectory. On the one hand, projects will continue to leverage social platforms to lower barriers to entry and expand their user base. For example, Flipr leverages social platforms to embed transactions within conversations. On the other hand, compliance and professionalization are accelerating. Platforms like Kalshi are attracting traditional capital into the market through regulatory licenses. This dual-track approach means that prediction markets have the potential to become both a tool for mass entertainment and public opinion, and a financial infrastructure for professional institutions to manage risk and conduct market pricing. However, the current prediction market still faces three major pain points: First, insufficient liquidity limits market depth, and excessive price spreads impact the user trading experience. Second, compliance. Prediction markets inherently combine characteristics of gambling and financial derivatives, and therefore often face gray areas or even direct regulatory restrictions in different jurisdictions. Maintaining decentralization and censorship resistance while building an operating framework compatible with existing legal systems is a key challenge for attracting institutional capital and mainstream users. Third, capital efficiency is an issue. The lack of return scenarios that compete with real-world financial instruments makes it difficult to attract long-term capital. If these core challenges are not overcome, the growth of the prediction market will rely more on speculation and short-term hot spots. However, once capital efficiency and the regulatory framework are improved, prediction markets can truly achieve scale and become a key infrastructure connecting information aggregation, risk management, and financial innovation.
