Why Event-Based Markets Are Attracting Investor Attention

Event-based markets let investors trade in contracts on whether or not a specific outcome occurs. They have been around for decades, especially in insurance and financial markets, but retail prediction markets propelled them into the public consciousness. To the point, billions are now traded weekly. Which has, of course, attracted more investor attention. 

The major players - Kalshi and Polymarket - exploded in popularity across the US during 2024, although they had seen steady growth from their launches in 2022. While both platforms still see use from professional traders and speculators, Kalshi in particular now sees most of its revenues come from trading on sports markets. Although many states see this as gambling, federally, these platforms are regulated by the Commodity Futures Trading Commission. This allowed them to roll out a gambling-like product nationally, which obviously helped in their huge growth. 

What Are Event-Based Markets - and How Do They Work?

Although most of the talk, especially for investors eyeing up growth opportunities, is around prediction markets, event-based markets are slightly wider in scope.

The term does fit most of the contracts offered by the big prediction sites, but it also covers tech-based insurance markets and some existing financial event contract services. The big prediction markets simply took most of these contracts on, as well as sports and pop culture markets. 

Although exact mechanics vary, event-based contracts let traders buy into a yes or no outcome - and they get paid out if they are correct in their prediction. To be clear: event-based trading is what prediction markets do, but they're not the only form of it. 

Kalshi, Polymarket, and most retail prediction markets that have since followed run on a similar model. Like so:

1. Market launches with Yes and No contracts, priced between 1 cent and 99 cents depending on prior assessed probabilities, where 99 cents = 99% implied chance.
2. Traders buy shares in either answer at those prices
3. From then on, they can also sell at any point to settle at that level
4. As traders buy and sell with new information or market reaction, prices shift to reflect new assessed probabilities
5. When the yes/no event is settled, correct predictions are paid out at $1 per share. Incorrect traders get nothing. 

This gives the system an extra layer of buying and selling. One that isn't present in many other event-based markets used in insurance or political polling, for example. It is also partly why operators successfully argued to the CFTC that the model shouldn't legally be considered gambling. 

Prediction Markets Have Already Made Early Investors Massive Profits 

From an investment perspective, actually using event-based markets is not a long-term strategy. Many states see it as basically gambling. Some contracts are very long-term, with the answer possibly years away - but most experts would still not consider it investing. 

However, the big retail prediction markets have attracted significant attention, gathering billions in funding rounds during their early growth spikes. Neither Kalshi or Polymarket was worth much more than $100 million in 2022. Now in 2026, Kalshi is valued at $22 billion and Polymarket at $15 billion. 

This huge increase of tens of times in value in just four years was driven by massive consumer interest. Both companies went from handling millions in monthly trades to billions weekly within just two years. The 2026 World Cup has apparently boosted volumes even further, with Kalshi recently seeing a billion dollars traded in a day for the first time.

And that growth has also created dips and spikes in the stock prices of large publicly-traded gambling firms, as they slowly reacted to the new competition and started their own event-trading platforms. Major gambling brands like DraftKings and FanDuel have both launched their own markets in 2026. 

For example, consider the number of event-trading and prediction markets listed here by comparison site Sportsbook Review. Gamblers have long used these sites for in-depth information on sportsbook features, and now traders use them to distinguish features at prediction markets. 

This shows just how much competition has intensified in the past couple of years alone. 

Why Analysts Think They Will Keep Growing 

However, not everyone is convinced - and there will be challenges ahead. Several US states have challenged Kalshi and Polymarket in court, or are looking to. There have also been very widely publicized incidents of insider trading - something both operators say they are working to stop. Even while critics claim it's something that can never be eliminated from the model.

Nevertheless, the continued growth of these markets over the past year, despite regulatory pushback and uncertainty, will be a positive sign for investors. The sector also has the broad support of the President Trump administration and the CFTC, which has promised to fight some states in court over the issue. 

With prediction markets now commonly cited in media broadcasts, more competition in the market than ever, and popular engagement off the charts, it's hard to see the model disappearing anytime soon. If growth continues as it is, investors will certainly remain very interested.