Delphi Digital: Prediction Markets Surge Past $600M And Emerge As Core DeFi Infra
In Brief
Delphi Digital’s “2026 Year Ahead” report finds that prediction markets have grown into an over $600M sector attracting major institutions and evolving into core DeFi infrastructure for options, insurance, governance, and coordination.
Cryptocurrency research firm Delphi Digital has examined the evolution of prediction markets in its latest “2026 Year Ahead” report, describing how the sector has moved beyond its niche origins into a category now exceeding $600 million in scale.
The study notes that major institutional and consumer-facing players are beginning to enter the space. CME Group has announced plans to list sports-related markets, Coinbase is preparing to launch its own prediction market products, and Robinhood has acquired MIAXdx as part of a strategy to operate in-house markets and lessen its dependence on Kalshi. At the same time, established platforms such as Polymarket and Kalshi are intensifying efforts to capture additional market share in an increasingly competitive environment.
According to Delphi Digital’s analysis, Polymarket is pursuing a strategy centered on combining its crypto-native user base with regulatory legitimacy under the U.S. Commodity Futures Trading Commission in order to maximize liquidity. A relaunch in the United States is expected soon through an acquired CFTC-licensed exchange, QCX. The company is also expanding toward a more traditional Web2 audience through partnerships with organizations such as the UFC, the NFL, and Yahoo Finance. On the infrastructure side, Polymarket is seeking to reinforce its onchain advantages through potential airdrop initiatives and deeper wallet integrations with platforms like Rabby and MetaMask, with the goal of strengthening user retention and network effects.
Kalshi, by contrast, is focusing on the defensive and offensive value of regulatory barriers and deep order book liquidity as it looks to expand both globally and into onchain environments. Backed by a reported $300 million fundraising round, the firm is moving into as many as 140 countries, a step intended to counter Polymarket’s international lead. Rather than positioning itself directly against decentralized finance platforms, Kalshi is integrating its liquidity into existing onchain hubs, including Jupiter and Phantom, in an effort to capture additional trading volume through high-traffic crypto-native channels.
The report also highlights that both Layer 1 and Layer 2 blockchain networks now have tangible financial incentives to attract prediction market activity. Delphi Digital expects grant programs to increasingly target projects in this category, motivated by the transaction volume and user engagement these markets generate. It further argues that general-purpose prediction platforms are unlikely to displace incumbents with established liquidity, suggesting that the more promising opportunities lie in niche offerings tailored to specific user communities and use cases.
Drawing parallels to the impact of perpetual futures on derivatives trading, the analysis suggests that prediction markets could apply a similar simplification to options. A contract framed around a question such as whether Bitcoin will close above a given price on a specified date effectively functions as a cash-settled binary option, but without the complexity of traditional options structures. These markets eliminate Greeks, strike ladders, and intricate pricing models, replacing them with a straightforward probability scale from zero to one hundred cents that is easily understood by a broad audience.
Delphi Digital notes that prediction markets capable of repackaging volatility into accessible, intuitive formats are likely to stimulate fresh demand for onchain options. Protocols such as Euphoria are cited as examples of this trend, with interfaces built around so-called “tap trading” that are designed to resemble casual games more than professional trading terminals.
Prediction Markets As DeFi Infra: From Speculation To Native Insurance, Governance, And Coordination
Prediction markets are increasingly being viewed as potential core infrastructure for decentralized finance (DeFi) by addressing a long-standing gap in native, trustless insurance. As DeFi grows, participants require instruments that allow them to hedge protocol, liquidity, and asset-specific risks without relying on centralized intermediaries. Short-duration markets with recurring settlement windows, such as fifteen- or thirty-day contracts framed around events like whether stETH will fall below 0.98 ETH for more than an hour within a given month, are emerging as a way for users to insure narrowly defined exposures with a high degree of precision. These structures resemble bespoke risk-transfer tools that can be tailored to individual portfolios and time horizons.
However, the formation of these markets faces structural challenges, particularly in sourcing reliable counterparties. Liquidity providers typically earn relatively modest premiums while assuming significant tail risk, including the possibility of severe losses if unlikely events occur. Despite this imbalance, demand is expected to be immediate and substantial for any platform that successfully solves this coordination problem, especially from participants who have large amounts of capital deployed across DeFi protocols and are seeking cost-effective ways to mitigate downside risk.
The broader opportunity in prediction markets is not framed as a direct contest with established platforms such as Polymarket, but rather as a process of disaggregating the existing stack to serve distinct categories of users more effectively. Professional traders and institutional-style participants require tools that enhance their informational advantage and help surface mispriced opportunities across a rapidly expanding array of markets. This has given rise to aggregators that provide unified dashboards for trading across multiple venues, along with advanced analytics services that offer risk modeling, alternative data streams, and wallet activity tracking. These layers are beginning to resemble the infrastructure that supports sophisticated trading in traditional financial markets.
At the same time, the addressable audience for prediction markets extends far beyond financial speculation. While the market for trading-oriented products is sizable, the market for social entertainment is significantly larger. Informal betting among friends is already a common behavior, yet most current interfaces are designed with professional traders in mind rather than mass-market users. Platforms oriented toward broader adoption are expected to prioritize features that emphasize social signaling and shared experiences, rather than focusing exclusively on profit optimization.
Looking ahead, many of the most active participants operating these tools at scale may not be human. Funds managed by artificial intelligence agents are expected to monitor data feeds in real time, identify mispriced markets, and execute arbitrage strategies more quickly and consistently than any individual trader. As these automated participants become more prevalent, the easily exploitable inefficiencies in binary markets are likely to be eliminated, compressing margins and reducing the availability of simple trading edges.
As traditional prediction market opportunities become more efficiently priced, both capital and users are anticipated to migrate toward new market designs and mechanisms. These include impact markets that price the consequences of outcomes rather than their probabilities, opinion markets that track group sentiment instead of objective events, crypto-native fantasy sports platforms that turn player cards into liquid and tradable assets, and futarchy systems in which governance decisions are guided by markets predicting whether proposals will meet predefined performance metrics. Additional experimentation is occurring in coordination markets, where protocols define specific goals, participants purchase tokens and take actions to achieve them, and collective success results in payouts and token appreciation.
Taken together, these developments suggest that prediction markets are evolving beyond a narrow role as speculative instruments. They are increasingly positioned as foundational components for onchain options, decentralized insurance, governance frameworks, and large-scale coordination, pointing toward a future in which they function as versatile financial and organizational infrastructure.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
