How Prediction Markets Work: Polymarket, Kalshi and Myriad Explained
Prediction markets let traders buy and sell shares that pay $1 if a specified outcome occurs; share prices (between $0 and $1) reflect the market’s implied probability. Markets come in binary, categorical and scalar formats and can be traded or exited at any time before resolution. On-chain prediction markets (e.g., Myriad, Polymarket) use oracles and smart contracts to resolve outcomes and typically rely on automated market makers (AMMs) or order books for liquidity. Centralized platforms such as Kalshi dominate volume; Kalshi reached an $11 billion valuation after a $1 billion funding round in Nov 2025. Polymarket, which settles on-chain, drew regulatory scrutiny (FBI search of founder in Nov 2024; Polymarket valued at $9 billion in Oct 2025 after a $2 billion investment). New entrants include Opinion (launched Q4 2025) and Myriad (launched Jan 2025 by Dastan/Decrypt), which integrates prediction markets with media engagement and uses AMMs to allow open liquidity provision. Market volume for prediction markets surged from $15.8B in 2024 to $63.5B in 2025, per CertiK, but CertiK also warned of structural strains: inflated volumes, security fragility and regulatory pressure (notably from the U.S. CFTC). Key takeaways for traders: prices imply probabilities (useful for event-driven trades), on-chain platforms offer lower fees and privacy but carry oracle/security and regulatory risk, and market momentum is strong though concentrated among a few platforms — watch liquidity, platform custody model (centralized vs. on-chain), oracle design and evolving regulation when sizing positions.
Neutral
The article describes rapid growth and innovation in prediction markets — a bullish signal for product adoption and new event-driven trading opportunities. However, it also highlights significant regulatory scrutiny (CFTC actions), security and structural risks flagged by CertiK, and concentration of volume among a few platforms. For traders this implies mixed near-term effects: increased liquidity and new trading instruments (positive for volatility-driven traders and market makers), but elevated regulatory and counterparty risks that can cause sudden liquidity withdrawals or price dislocations (negative). Historically, regulatory actions (e.g., CFTC fines against crypto derivatives and past Polymarket enforcement) have produced short-term market disruptions and reduced volumes on affected platforms, while long-term adoption often resumed as platforms adapted compliance or moved on-chain. Therefore the net impact is neutral: the sector’s growth supports longer-term bullish adoption of event-based trading, but material regulatory/security risks and platform concentration keep near-term outlook uncertain. Traders should monitor liquidity metrics, oracle resilience, custody models (on-chain vs centralized) and any regulatory filings or enforcement actions; use smaller position sizes, tighter risk controls and avoid overexposure to a single platform.