Time Will Tell: What’s Next for Prediction Markets, Volume Growth Strategies, Continuous Information Perps, and Capitalizing on Momentum

Key Insights:

• Prediction markets have validated product-market fit, with Polymarket and Kalshi sustaining volumes well beyond the 2024 U.S. Presidential Election.
  
• Retail speculators are the critical growth engine. They supply the “dumb money” necessary for sharps and sophisticated traders to participate, making them the most important audience to capture.
  
• Growth will come from designing markets that are easy to understand, fun to engage with, offer meaningful upside, and resolve quickly.
• Liquidity and backend infrastructure will likely be dominated by well-capitalized incumbents like Polymarket and Kalshi, and eventually by exchanges such as Hyperliquid and Coinbase. Startups are best positioned to win by owning the user-facing layer: frontends, social trading bots, and mobile apps in addition to innovative ways to deliver leverage.
• Continuous information stream prediction market perps have the potential to drive more volume than binary outcome markets.
• Focusing on enabling user-generated longtail markets will not be fruitful. Instead, prediction markets should focus on making the UX of fathead markets as compelling as possible.