Prediction markets have been around for a long time, but it was only during the last election that they broke fully into the mainstream, with bets on Donald Trump or Kamala Harris soaring.
A month after Trump's election win , betting platforms like Kalshi are looking ahead to what's next for the industry.
They say the surge in user activity is trickling down to other markets, ranging from pop culture and celebrity drama to bets on the weather.
Betting experts, meanwhile, predict the market will keep growing.
Observers see brokerages and startups racing to capitalize on the increased interest since the election, and say that trend could be especially pronounced as regulation eases.
Trickle-down effects
Kalshi cofounder Tarek Mansour says his site saw a rapid surge in user activity after winning the right to offer political trades to US users following a legal battle with the Commodity Futures Trading Commission in October.
That burst of activity has had the effect of encouraging users to bet on non-political outcomes, too, he said.
"Once you're in, you have an account, you understand how it works, you have the habit of checking, you're going to trade more, right?" he told Business Insider.
Political trades still appear to have the greatest volume on the site, with bets on Trump's cabinet picks raking in millions in betting volumes. Users have wagered $6.5 million on Trump's pick for Secretary of Defense, while his choice of FBI Director has garnered $1.8 million as of Friday afternoon.
Other policy outcomes, like the Federal Reserve's rate-cutting cycle, are gaining close attention from traders, too. Users have wagered about $6.3 million on the number of rate cuts in 2024, and another $2.3 million on the Fed's decision in December.
Northwestern University's Thomas Miller, who studies prediction markets closely and runs the election forecasting model, The Virtual Tout , says interest in those markets makes sense. Beyond just making a profit on a correct bet, investors using economic markets may be looking to offset any related risk to their portfolios.
"They are a hedging mechanism. There are investors that are going to be like investors in the political markets, where they're just making a prediction of what's going to happen, but there are also investors in the economic markets that are hedging," he told Business Insider.
Bets on pop culture have also gained steam in recent weeks, like the winner of the Game of the Year and Grammy Song of the Year, both of which have drawn around $500,000 worth of bets. Rotten Tomatoes scores for particular movies and the Oscars winner for Best Picture are also popular betting markets.
Even the weather is attracting bettors. A bet based on the highest temperature recorded in New York City for Friday was among the site's top 10 trending trades on Friday afternoon.
Still, volumes in other categories pale in comparison to political bets on the site.
Harry Crane, a statistics professor at Rutgers University who studies prediction markets, says he suspects sports bets, if legal for the sites, could be a good entry point to rack up greater volume in non-political trades.
"Sports betting is just very popular. Elections are popular every couple of years, but not on a daily basis," Crane said.
Kalshi's increasingly rapid listing process could also help the rising interest in more quickly resolved trades in areas like pop culture and weather.
"We listed more markets in October alone than the entire past 12 months combined," Mansour said, adding that it now takes 24 hours or less to list a new market. Listing their first-ever market took 18 months.
Looser regulation and emerging competition
Crane and Miller said the incoming Trump administration's lighter approach to regulation could also help predictor markets grow.
Miller says less regulation could generate more interest from large brokerages and new sites looking to capitalize on the rising interest in prediction markets, joining retail brokerages like Robinhood .
"This is going to be another area for securities and financial services. Absolutely. We're just starting to see it," Miller said, adding, "We're at the beginning of a new cycle."
Those new competitors will likely be helped, too, by Kalshi's court win earlier this year, he said.
"That's a signal to other firms," he said. "It is now legal, so I don't have to be concerned about regulators coming after me as long as I play the game fair, transparent, and in the contracts they offer."
Crane argues that looser regulation will also help prediction markets become more accurate , especially when it comes to predicting political outcomes. Higher volumes make any market manipulation attempts harder to pull off, he says.
"Everything kind of feeds off of everything else, and by trying to limit one aspect of it, or trying to police one aspect of it, it can often ruin the entire market function," Crane told BI in a previous interview in August.
Mansour similarly welcomes looser regulation and greater competition in the industry, and says it will only help prediction markets to grow.
"I think more players will help build the asset class faster. That's a good thing," he said, adding, "I don't see a reason why prediction markets won't topple the stock market at some point. It's very simple. Yeah, people care about stocks, but people care more about politics or COVID, economics or weather. So they should be trading it," he said.
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