How Coinbase and betting sites will challenge Polymarket and Kalshi’s $4bn lead in 2026

Seeking truth has never been so profitable.

Prediction markets, futures markets for retail users to forecast everyday outcomes, peaked in December at over $4 billion in weekly trading volume.

Despite record volumes plummeting after the 2024 US elections, popular platforms like Kalshi and Polymarket blew past those highs again and again throughout 2025, according to data collated by the Dune user dashboard.

Along the way, they raised hundreds of millions of dollars in fresh capital at multi-billion valuations.

Now, insiders suggest that 2026 will be even bigger.

“Prediction markets should be a multiple of their current size,” Dustin Gouker, founder of gambling consultancy Closing Line Consulting, told DL News.

That growth won’t just come from homegrown crypto entities — gambling platforms and more traditional financial firms are lining up too for a slice of the pie.

However, regulatory challenges risk grinding the $4 billion freight train to a halt, or at least slow it down as it steams into 2026.

Surging competition

Polymarket and Kalshi enter the new year as competition heats up.

Crypto companies like Coinbase and Crypto.com, as well as more traditional sports-betting firms, are butting in.

“There is so much opportunity for continued growth that I believe there is room for many players because prediction markets, in some ways, will be limitless,” Travis McGhee, the global head of predictions at Crypto.com, told DL News.

In November, the CME Group, which runs the Chicago Mercantile Exchange, said it would launch a prediction market product in December together with one of the world’s largest gambling companies, FanDuel.

The CEO of Flutter, the Irish-American sports betting company that owns FanDuel, said the offering would unlock “an immediate growth opportunity” for the $17 billion company.

Elsewhere, trading platform Robinhood muscled into the competition.

Having partnered with Kalshi, the fintech generated roughly $300 million in revenue across nine billion event contracts and one million prediction market traders.

In November, Robinhood announced that it would launch its own proprietary prediction market in early 2026 — potentially leaving Kalshi out of the new product.

“When you build something as successful as Kalshi has, it’s no surprise that everyone and their mum wants a piece of it,” Jack Such, a growth executive at Kalshi, told DL News in November.

“It’s the ultimate compliment that companies like CME and Robinhood are validating the industry we created.”

Regulatory crackdown

Meanwhile, prediction markets have come under fire from authorities worldwide.

Gaming commissions across the US, for instance, have been a central sticking point. Some allege that prediction markets operate as unlicensed sportsbooks rather than federally regulated derivatives platforms.

And with sports markets on both Kalshi and Polymarket emerging as extremely lucrative opportunities, overcoming these legal issues is crucial for all companies entering the niche in 2026.

“Trading volume should meaningfully increase several times over current, as long as sports betting continues to be legal,” Gouker.

Legal headaches

After a drawn-out legal battle with the Commodity Futures and Exchange Commission, which concluded in 2025, Kalshi looked bound for greener pastures for the rest of the year.

That soon changed when state gaming commissions in the US began to issue cease-and-desist letters as sports markets boomed on various prediction market platforms.

In October, Kalshi sued the New York State Gaming Commission over the agency’s order, putting its enforcement — and the company’s exit from the Empire State — on hold.

Several states followed suit, just as Kalshi countersued.

Many of the cease-and-desist letters revolve around the same legal argument: Prediction market platforms are operating as betting platforms that have failed to register with local state authorities.

As such, their continued operation is illegal, as the New York gaming commission alleged.

“By operating unlicensed sports betting, Kalshi has violated gambling laws, engaged in illegal deceptive activity, and unjustly enriched itself at the expense of tens of thousands of consumers,” the November complaint read.

Kalshi responded that the CFTC regulates it and thus does not fall under the purview of state gambling authorities.

And as more and more providers cropped up over the year, similar arguments have played out among the competition, too.

Amid pushback from several state regulators, Crypto.com pulled its prediction market product from several states.

On December 12, the gaming outlet Sports Betting Dime reported that the Arizona Department of Gaming intended to revoke Underdog’s gaming license due to its partnership with Crypto.com to launch prediction markets.

Crypto.com’s McGhee said the company regularly works with regulators and other key stakeholders to ensure compliance with its product.

Elsewhere, even before facing any legal action, Coinbase preemptively sued authorities in Michigan, Illinois, and Connecticut.

“Because the spectre of Illinois enforcement is imminent and existential to Coinbase’s event-contract operations in Illinois, Coinbase respectfully seeks expedited consideration of its request for a preliminary injunction,” the December 18 filing from December 18.

Truth-seeking commodities

Many prediction markets argue, including Kalshi, that so-called event contracts, the markets these platforms spring up to let users put money down on future outcomes, are essentially commodities.

Certainly, it isn’t gambling, Crypto.com’s McGhee told DL News.

“It’s important for people to understand that prediction markets are not wagering or betting,” he said.

Users can buy “yes” or “no” tokens for any number of geopolitical, sports, or political questions.

A market with over $60 million in trading volume asks users how much the US Federal Reserve will cut rates, if at all, in January.

The “yes” token for the response “no change” currently has the highest odds at 83%, making the token worth 83 cents. If the Fed decides not to change rates at the January meeting, then the token’s value will jump to one dollar, and all other outcomes will plummet to zero.

It’s this monetary incentive, proponents say, that gives prediction markets their enhanced truth-finding ability.

Besides truth-seeking, CEOs posit that prediction markets give users a way to protect their financial positions, like a hedge.

Robinhood CEO Vlad Tenev said prediction markets can serve as a variety of insurance against catastrophe, such as fires or floods.

Into 2026

If 2025 was the year prediction markets hit the mainstream, 2026 will reveal their staying power.

Negative decisions in federal and state courts remain major blockers for the niche, Gouker said.

Likewise, the upcoming midterm elections next year will mark another turning point for prediction markets and the crypto industry more broadly.

“If Democrats take back the House, you could see this manifest more seriously after 2026,” Gouker told DL News.

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at [email protected].