A $10 trillion new track? Bernstein is bullish on the long-term potential of prediction markets as Robinhood (HOOD.US) and Coinbase (COIN.US) accelerate their expansion.

Wall Street investment bank Bernstein said the rapidly rising prediction market may be far more than just another form of traditional sports betting, and is expected to develop into a new type of financial market infrastructure. As trading categories expand from sports events and political events to cryptocurrencies, stocks, commodities, and even corporate operating metrics, Bernstein expects global prediction market trading volume to grow from about $410 billion in 2026 to about $10 trillion in 2035, with a compound annual growth rate of about 70% from 2025 to 2035. Bernstein pointed out that the debate surrounding prediction markets is currently focused mainly on regulatory definitions, such as whether sports event contracts should be regarded as sports betting products regulated by individual states or as derivatives regulated by the U.S. Commodity Futures Trading Commission (CFTC). However, the bank believes the market may be underestimating the structural opportunity behind prediction markets. Unlike traditional bookmakers, prediction markets adopt an exchange model. The platform itself does not need to become the counterparty to users' trades, but instead connects buyers and sellers through a global order book and brings in professional market makers to provide liquidity. This model may enable prediction markets to expand further from sports into the broader financial market and attract institutional investors. Trading volume explodes, potentially approaching $10 trillion by 2035 Prediction markets have already seen significant growth this year. The report shows that global prediction market trading volume rose rapidly from about $50 billion in 2025 to about $300 billion in the first eight months of 2026. The main drivers include the rapid development of short-cycle contracts in cryptocurrencies and commodities, such as 15-minute Bitcoin contracts, as well as a sports trading boom brought by the World Cup. It is worth noting that after the World Cup ended, prediction market trading volume remained at historical highs, indicating that new users did not completely churn after the event ended. Bernstein expects full-year trading volume in 2026 to reach about $410 billion and to grow further to nearly $10 trillion by 2035. In this process, the structure of prediction markets may also change significantly. In 2025, sports contracts accounted for about 61% of prediction market trading volume, while financial assets accounted for only about 12%. But Bernstein expects that by 2035, the share of sports will fall to about 38%, while the share of financial assets including cryptocurrencies, stocks, and commodities will rise to about 49%, becoming the largest trading category in prediction markets. In other words, Bernstein does not believe the endgame for prediction markets is a larger "online bookmaker," but rather a comprehensive trading platform capable of trading different outcomes such as sports, financial assets, economic data, and political events at the same time. From "betting on games" to trading stocks, gold, and corporate operating data The most basic product of a prediction market is a binary contract designed around the outcome of a future event. For example, users can trade "whether a certain team wins," "whether a certain index closes above a specific level," or "whether a certain economic data point exceeds expectations." If the event occurs, the contract ultimately settles at $1; otherwise, it settles at $0. Before expiration, the contract can continue trading between $0.01 and $0.99, so the price itself can also be understood as the market's real-time judgment of the probability of the event occurring. But Bernstein believes the future scope of application will far exceed such simple event contracts. The bank expects short-dated binary options and long-dated perpetual futures may gradually appear within the same platform and account system. Users can trade the outcome of Bitcoin's price over 5 or 15 minutes, and can also hold perpetual contracts on assets such as gold and stocks. More noteworthy is the so-called "KPI market." In the future, investors may not need to directly buy or sell a company's stock, but instead trade a specific operating metric, such as vehicle deliveries, production, subscriber growth, or trading volume. This means that if investors only want to express a view on a certain operating data point of a company, they can directly trade that metric without indirectly betting through the company's stock price, thereby reducing interference caused by macroeconomics, capital allocation, and other factors. Prediction markets are attracting new users beyond the gambling industry Sports remains the most important user entry point for prediction markets at present, but Bernstein believes this market is not simply taking existing users from traditional sports betting platforms such as DraftKings(DKNG.US), but is expanding the overall market's participant base. Data shows that about 80% of Kalshi users had never used an online sports betting app before, while the overlap between users of DraftKings Predictions and DraftKings' traditional online sports betting business is only about 1%. The report also noted that currently 20 U.S. states, with about 150 million consumers, do not have access to an open and licensed online sports betting market, equivalent to about 45% of the total U.S. population. Bernstein estimates that if prediction markets merely attract consumers in these states who might otherwise have participated in sports betting, the potential addressable trading volume for related sports prediction markets in 2026 could exceed $600 billion. Therefore, the bank believes the greater significance of prediction markets may not be redistributing existing gambling market share, but expanding the user base and liquidity of sports trading itself. Institutional capital may become the next stage's growth engine Another potential change in prediction markets is the entry of institutional investors. Bernstein expects institutional capital to concentrate mainly in non-sports prediction markets in the future, including cryptocurrencies, stocks, commodities, economic data, and political events. By 2035, institutional trading may account for about 50% of non-sports prediction market trading volume, corresponding to about $3 trillion, or about 31% of total prediction market trading volume. The logic behind this is that prediction markets allow institutions to directly manage risk around a specific event. For example, bond investors can directly trade whether the Federal Reserve cuts rates without indirectly hedging through U.S. Treasury futures; pharmaceutical funds can take positions on whether a certain drug pricing bill passes; and merger arbitrage funds can directly trade whether a certain acquisition can pass antitrust review. The advantage of such contracts is that investors can directly trade the event they wish to hedge, thereby reducing basis risk arising from indirect hedging using related assets such as stocks, interest rates, or foreign exchange. The institutionalization trend has already begun to emerge. The report said that in April this year, Kalshi completed the prediction market industry's first institutional block trade; in June, Polymarket completed the first on-chain institutional block trade, used to hedge the cost of renting NVIDIA Corporation(NVDA.US) H100 GPU computing power; Galaxy Digital also completed a Kalshi trade of about $10 million linked to the outcome of the U.S. CLARITY ACT. Robinhood(HOOD.US), Coinbase(COIN.US), and others compete for the entry point to new financial infrastructure As the prediction market expands, a competition over control of the industry chain has already begun. Bernstein divides the prediction market industry chain into multiple segments including consumer entry points, futures commission merchants (FCM), exchanges (DCM), clearing organizations (DCO), and market makers, and believes that with each additional segment a platform controls itself, it can add new revenue sources. However, in terms of competitive barriers, the bank believes the most critical factor remains user distribution capability, because trading and clearing infrastructure can be bought or built, but owning a large number of retail customers with funded accounts requires long-term accumulation. Among the companies covered by Bernstein, Robinhood is considered to have clear advantages in industry positioning. It not only has a consumer app and a large retail customer base, but also has laid out exchanges and clearing through businesses such as Rothera. At the same time, the company still offers users contracts from other platforms such as Kalshi, ForecastEx, and Crypto.com, thereby expanding product coverage. Coinbase, Interactive Brokers Group, Inc. Class A(IBKR.US), as well as traditional exchanges and gambling operators, are also entering prediction markets at different points in the chain, and a competition around next-generation event trading infrastructure is taking shape. Regulation remains the biggest uncertainty However, there is still major uncertainty over the regulatory status of prediction markets, especially sports event contracts. The core of the dispute is whether sports event contracts are financial derivatives regulated by the CFTC or are essentially sports betting that should be regulated by U.S. states. Bernstein pointed out that courts have recently offered differing interpretations of this issue, and legal disputes among U.S. state regulators, the gambling industry, the CFTC, and prediction market platforms are still ongoing. The bank expects the long-term regulatory framework for sports prediction markets may not become clearer until 2027 to 2028. Therefore, issues the industry needs to watch in the coming months include whether related cases ultimately reach the U.S. Supreme Court, whether states further strengthen enforcement and taxation, and whether the U.S. federal level readjusts the regulatory framework. Despite regulatory risks, Bernstein believes prediction markets are undergoing a more important structural change: they are gradually evolving from a retail product centered on elections and sports events into trading infrastructure capable of accommodating financial assets, macroeconomics, corporate operating metrics, and event risk. If this trend continues, sports betting may be only the first stop for prediction markets in attracting consumers, rather than the final form. As the share of financial assets and institutional capital continues to rise, prediction markets may ultimately evolve into a new type of market spanning traditional finance, crypto assets, and event trading, and form annual trading volume of nearly $10 trillion over the next decade.