As we explore the state of Web3, one recurring theme is that broad ideas and specific products have struggled to gain widespread appeal. NFTs had a moment of cultural significance in 2021 but that hype faded as the market cooled. And other innovations — like DeFi and Web3 gaming — just haven’t caught on with people outside of the crypto subculture.
But there is one area of Web3 that has already penetrated the public consciousness and has the potential to surge in popularity in the coming years: prediction markets.
Prediction markets are an interesting concept for two reasons. First, they allow participants to speculate — or more bluntly, gamble — on the outcomes of virtually any popular event. For context, Americans wagered nearly $120 billion on legal sports betting sites in 2023. Prediction markets allow people to bet on far more than sports while offering a new and exciting way to back their convictions.
Second, prediction markets have proven to be remarkably effective at forecasting outcomes. By combining the “wisdom of the crowd” and market dynamics, they often predict what is likely to happen before it unfolds. Moving forward, prediction markets are poised to play an increasingly prominent role in media and public discourse.
What are Prediction Markets and How Do They Work?At their core, prediction markets function like the stock market. But instead of shares representing companies, they represent participants’ beliefs in the likelihood of future events occurring. Buying and selling in these markets is based on expectations of outcomes rather than corporate success or failure.
In prediction markets, share prices range from $0 to $1 with the exact dollar amount reflecting the probability of an event occurring on a scale of 0–100%. For example, in a market predicting an election result, a share priced at $0.70 suggests a 70% chance of that candidate winning. If new developments — such as a favorable poll or scandal arise — the price may fluctuate, indicating a shift in the collective sentiment as shares change hands. Participants profit by buying lower-priced shares and selling them as their prediction becomes more likely and the value increases. They can also hold shares until the event’s final outcome is determined and sell them for the maximum value of $1.
What Makes Prediction Markets Compelling?Prediction markets use the blockchain to offer numerous benefits (e.g., transparency, security, and global accessibility). However, their impact as we transition into the Web3 era goes far deeper than that.
Prediction markets democratize the exchange of information. They shift power away from legacy media and so-called experts who often make predictions driven by personal motivations or agendas. Instead, prediction markets gather thoughts and opinions from the collective public and produce forecasts and narratives that better align with the consensus opinion and, as a result, tend to be more accurate.
What sets prediction markets apart is that participants must back their beliefs with real financial stakes. By requiring “skin in the game,” these markets disincentivize baseless claims or ideologically driven predictions that dominate much of traditional news and social media conversations. Simply put, prediction markets require well-informed, thoughtful predictions, which results in more accurate and reliable information.
The Resurgence of Web3 Prediction Markets in 2024Prediction markets became especially popular in 2024 but the concept isn’t new in the Web3 era. Augur and Gnosis (two blockchain-based prediction markets) both launched all the way back in 2015. However, these early efforts struggled with user adoption and liquidity. And because the markets had such little activity, they failed to capture public sentiment and make accurate forecasts.
Today, two prediction markets — Polymarket and Kalshi — are thriving thanks to advancements in blockchain technology and people’s appetite to bet on popular events such as the U.S. presidential election, the 2024 Summer Olympics, and much, much more.
PolymarketLaunched in 2020, Polymarket has become the global leader in prediction markets. Its users can trade on the outcomes of nearly every event in the public consciousness (we’ll look at specific markets they offer later on). The platform has rapidly grown in popularity, bringing in as much as $2.63 billion in monthly trading volume in November 2024. While many Web3 products have struggled to gain traction, Polymarket’s diverse markets and appeal to the general public have helped it attract a large user base.
KalshiKalshi, founded in 2018, is a CFTC-regulated prediction market platform, meaning it fully complies with U.S. financial regulations and is accessible to U.S. citizens. It offers popular markets focused on politics, the economy, technological innovations, and cultural events but doesn’t provide some of the obscure markets Polymarket does. Still, it too has experienced rapid growth, 5Xing its userbase in 2024.
The 2024 Presidental Election: How Polymarket Rose to Prominence and Nailed the OutcomePrediction markets broke into the mainstream and dominated public discourse in the months leading up to the 2024 U.S. presidential election. As November approached, traditional polls — which had been the most trusted source of voter sentiment since the early 1800s — showed Donald Trump and Kamala Harris in a near dead heat. Swing state polls painted a similar picture, particularly in Pennsylvania, where many believed the entire race would be decided. Despite these tight margins, prediction markets such as Polymarket and Kalshi offered a wildly different — and ultimately more accurate view of voter sentiment.
Examples of Polymarket markets during the U.S. presidential electionAs results rolled in on the evening of November 5th, Polymarket’s predictions aligned far more closely with the actual outcome than traditional polling did. Polls had shown that key swing states, including Pennsylvania, Wisconsin, Michigan, North Carolina, Georgia, Arizona, and Nevada were toss-ups, suggesting Trump and Harris would likely split them. However, prediction markets consistently favored Trump in each of these states in the final days before the election — often by significant margins. Ultimately, Trump won every swing state, proving that prediction markets are far more accurate for predicting election outcomes than polls.
In addition to their accuracy, prediction markets were timelier in the lead-up to the election. Markets reacted in real-time to developments, such as debate results, campaign announcements, and breaking news, adjusting rapidly to reflect changes in voter sentiment. Traditional polls, by contrast, often required days to capture these shifts.
Despite being correct in the end, prediction markets faced plenty of criticism leading up to the election. Some argued they were manipulated by “whales” attempting to influence public perception or the election outcome itself. While it’s true that one user bet millions on a Trump victory (and ultimately won $85 million), prediction markets succeeded in their intended objective: aggregating collective wisdom to deliver accurate forecasts.
The 2024 Summer Olympics: How Polymarket Offered a New Form of Sports BettingMonths before garnering attention during the presidential election, Polymarket surged in popularity during the 2024 Summer Olympics in Paris. It offered gamblers an innovative way to bet on sports and provided avid fans with real-time insight into probabilities for various events and the overall medal tally.
Traditional sports betting platforms use a wealth of data and advanced algorithms to set odds, with the goal of getting nearly an even amount of wagers on both sides. Not only does this mean the savviest bettors have only a slim edge. It also means wagers are locked in place once made, preventing the bettor from adjusting their position as new information emerges. Prediction markets, on the other hand, allowed participants to continuously trade shares on Olympic outcomes based on real-time market sentiment and changing circumstances.
Examples of Polymarket markets during the 2024 Summer OlympicsThese examples highlight why prediction markets can be more appealing to savvy bettors than traditional sportsbooks. In prediction markets, participants bet against each other, not the house, creating opportunities to capitalize on market inefficiencies. For instance, a bettor confident in Simone Biles’s or Léon Marchand’s Olympic performances could have bought and sold shares as prices bounced around, rather than being locked into the fixed odds offered by a sportsbook.
The Diverse Market Opportunities Available on PolymarketIn addition to elections and sports, prediction markets cater to a broad spectrum of interests. Whether you’re into pop culture, a crypto enthusiast, or curious about the future of science, there is truly something for everyone.
The expansive range not only helps prediction markets attract a large user base but also demonstrates their potential to accurately forecast outcomes on topics where it was previously impossible. Let’s explore some of the markets that can be found on Polymarket.
PoliticsThe range of markets gives platforms like Polymarket and Kalshi their widespread appeal. Traditional betting platforms typically focus on sports, major awards shows like the Oscars and Grammys, and sometimes political elections. Prediction markets, on the other hand, feature a wide array of topics and offer multiple markets within each category. This variety attracts not only gamblers but also individuals who are simply curious about the projected outcomes of the events that matter to them.
Polymarket’s Obscure and Controversial MarketsWhile its accuracy in predicting elections and its variety of markets have helped Polymarket rise to prominence, another factor has contributed to its growth: its willingness to host obscure and even controversial markets. This openness has sparked both praise for creating engaging and unique experiences for its users and criticism for enabling speculation on ethically questionable topics.
Examples of obscure marketsFor many users, Polymarket’s more obscure markets are part of its allure. They allow participants to engage with unique topics that traditional platforms would never cover, offering a way to apply niche expertise or simply indulge in curiosity.
Examples of controversial marketsDespite being Web3 products — and decentralization being a core tenet of Web3 — Polymarket and Kalshi impose restrictions on the markets available on their platforms. Users can suggest potential markets, but their teams carefully vet these requests and oversee market implementation.
While both platforms explicitly avoid markets related to violence, terrorism, or illegal activities, Polymarket, in particular, often walks a fine line. The wide variety of market categories they offer — including those deemed controversial or just entertaining — helps them draw attention to their product and attract new users.
The Future of Prediction Markets Goes Beyond Web3Over the past year, prediction markets have emerged as one of the most exciting developments in Web3. Despite being built on the blockchain, their usability resembles the typical consumer-facing Web2 apps we’re already accustomed to. And unlike many Web3 products — such as those in the DeFi and NFT spaces — which primarily attract Web3 natives and cryptocurrency enthusiasts, prediction markets appeal to the general public.
Sure, they offer gamblers an exciting way to bet on a wide range of topics not typically offered by traditional sportsbooks. But what truly makes them compelling is their potential to shape discussions around the topics that dominate public discourse. Whether predicting the outcome of an election, the winner of a sporting event, or the next viral social media moment, prediction markets could change how our society engages with global events in the coming years.
Polymarket is Predicting the Outcomes of Elections, Sports, and Pop Culture Events was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.