Key Moments:
- Intercontinental Exchange (ICE) has announced plans to invest up to $2 billion in Polymarket, marking a major institutional endorsement for prediction markets.
- During the 2025 New York City mayoral election, more than $429 million was traded on Polymarket, reflecting a significant shift toward real-money event forecasting.
- New York’s proposed ORACLE Act (A9251) would enforce broad restrictions on prediction markets, including bans on key contracts and steep penalties for violations.
Industry Evolution: From Betting to Information Trading
For years, the gambling industry has sought to uncover new arenas for user engagement. In 2025, prediction markets have emerged as a distinct force, offering platforms where contracts on real-world events are actively traded.
Unlike traditional gambling or financial trades, prediction markets reside between the two worlds, attracting intense attention from regulators, industry players, and technology leaders. Moves like Polymarket’s U.S. entry through a licensed exchange, ICE’s up-to-$2-billion sector investment, FanDuel’s expansion into forecasting, and New York’s moves to curtail these markets have pushed them from niche status into mainstream relevance.
The surging popularity of prediction markets reflects a broader structural evolution rather than a passing trend.
How Prediction Markets Challenge Traditional Sportsbooks
Sportsbooks have long made volatility their business, with users chasing emotional highs on games and matches. Prediction markets, in contrast, focus on monetizing probability, offering informed pricing based on collective sentiment and analysis rather than luck-based outcomes.
This difference signals new opportunities for the gambling sector:
- User Diversification: Prediction platforms attract users interested in analysis and data, broadening the appeal beyond thrill-seekers.
- Revenue Potential: Operators may license sentiment data or hedge operational risk through these insights.
- Lower Churn: Continuous engagement in forecasting could foster user retention when compared to event-driven betting.
Political Stakes and Market Influence
A milestone moment for prediction markets occurred with the 2025 New York City mayoral election, which saw more than $429 million traded on Polymarket. In the final phase of the campaign, traders signaled candidate Zohran Mamdani as the clear favorite based on near 100% implied probability. After Mamdani’s eventual win, it was noted that the market had priced his chances at approximately 92% prior to the vote.
| Event | Platform | Volume Traded | Implied Probability (Pre-Result) | Outcome |
|---|---|---|---|---|
| 2025 NYC Mayoral Election | Polymarket | $429 million | ~92% for Mamdani | Mamdani Victory |
The race also spotlighted challenges for these markets. Polymarket received criticism for publicly posting that Mamdani’s odds were “collapsing” despite market data suggesting otherwise, raising concerns about real-money markets intersecting with political narratives.
Regulatory Scrutiny and the ORACLE Act
Prediction markets are under increasing scrutiny from lawmakers wary of controversial headlines and ethical breaches. CFTC Commissioner Christy Goldsmith Romero highlighted risks where markets could incentivize negative outcomes, underlining the sector’s regulatory sensitivity.
The proposed ORACLE Act (Assembly Bill A9251) in New York seeks sweeping changes: bans on political, disaster, and financial security-linked contracts; required consumer protections such as age restrictions and self-exclusion; restrictions on advertising; and substantial penalties, including daily fines up to $1 million.
Senator Joseph Addabbo, chair of the Senate Racing, Gaming & Wagering Committee, commented to DeFiRate: “I don’t like to wait on the sidelines. If you’re operating what is, in substance, a gambling platform, you need a license.” Assemblymember Clyde Vanel, the bill’s sponsor, stated, “Prediction markets have wrapped wagering in new jargon and skipped the hard part: licensure and oversight.”
Further complicating matters, Kalshi has filed a lawsuit opposing New York’s proposed restrictions, arguing that regulation should rest with the CFTC, not individual states.
Blockchain, Technology, and Institutional Integration
Originally launched on Ethereum’s Polygon network, Polymarket was global and permissionless until regulatory requirements prompted a pivot. By acquiring QCEX, a CFTC-licensed exchange and clearinghouse, for $112 million, Polymarket moved towards full U.S. compliance. The September 2025 CFTC no-action letter opened the door for Polymarket’s U.S. operations within defined parameters.
With ICE’s financial commitment, Polymarket now integrates blockchain transparency with regulated infrastructure, aiming to distribute live event-data to financial institutions. These data streams could soon be seen alongside traditional assets on trading terminals, transforming perception from speculative betting to actionable market intelligence.
Key technology advantages include on-chain transparency, allowing every contract and transaction to be audited. Market-driven price formation provides real-time insight that surveys and polling do not, appealing to economists, analysts, and institutional users alike.
Risks and Mitigants in the Evolving Landscape
Despite these advances, challenges persist:
- Arbitrage: Efficient traders sometimes exploit mispricings, profiting regardless of eventual outcomes.
- Liquidity: Specialty markets may lack depth, necessitating new models or institutional support.
- Manipulation: Larger players or those with inside knowledge could influence outcomes.
The partnership between ICE and Polymarket, underpinned by QCEX’s regulated structure, aims to introduce more stability and oversight than peer-to-peer DeFi models alone.
Outlook: Transforming Uncertainty into Market Opportunity
Prediction markets are positioned as a unique asset class, supporting hedging, sentiment analysis, and risk management. ICE’s up-to-$2-billion investment signifies deep institutional belief in the value of market-driven probability data.
Yet, the regulatory landscape remains unsettled. The CFTC offers federal compliance opportunities, while state-level approaches like New York’s ORACLE Act may force platforms to adapt, restrict services, or challenge the boundaries of federal versus state oversight.
Ethical debates continue: Should markets allow contracts on politics, disasters, or other sensitive topics? The ORACLE Act pushes for strict boundaries, while market participants also bear responsibility for setting internal ethical standards.
Polymarket’s transition from a blockchain startup to a regulated market operator highlights how crypto-native innovation is merging with established finance. Potential tokenization developments could usher prediction markets deeper into mainstream adoption and integration.
What to Watch
- Polymarket’s progression following its U.S. relaunch and acquisition of QCEX
- The fate and enforcement of New York’s ORACLE Act (A9251)
- The outcome of Kalshi’s legal challenge against state-level restrictions
- Adoption of Polymarket event-data by ICE and institutional networks
- FanDuel Predicts launching in December 2025 in states without online sports betting
- The evolution of liquidity solutions for niche and non-political contracts
Conclusion
Prediction markets are rapidly moving from the fringes of crypto trading to the core of financial market innovation. Their growing influence is prompting action from Wall Street, regulators, and technology firms. As these platforms bridge the gap between speculation and informed analysis, the challenge now lies in balancing innovation with responsibility and oversight. The coming months will shape whether prediction markets are ultimately regarded as valuable tools for insight – or simply another form of gambling dressed in new language.
- Author
Daniel Williams
