Why 2026 Could Decide the Future of Prediction Markets

Traditional sportsbook operators are now playing catch-up, with FanDuel, DraftKings, and Fanatics all launching their own prediction products in recent weeks. Meanwhile, Polymarket faces challenges in getting up and running in the US, and ongoing regulatory uncertainty and potential market consolidation are on the industry’s radar. 2026 is poised to be an intriguing year in the world of prediction markets.

Polymarket Lagging Behind

Polymarket was historically seen as the superior prediction market platform to Kalshi, attracting significantly more interest from investors. However, it failed to fully re-enter the US market by the end of 2025, despite acquiring a prediction market exchange and clearinghouse, QCEX, in July. It got CFTC approval in September to re-enter the market after a three-year absence.

Polymarket previously accepted business from US users until 2022. However, the CFTC deemed it to be offering an unregistered derivatives platform. It reached a settlement with the CFTC to withdraw from the market and focused on other regions, such as India and Germany.

Polymarket has had several false dawns in 2025. It ran Meta ads in August stating that it would be offering legal football trading in all 50 states “this fall.” Then in September, Polymarket Chief Marketing Officer Matthew Modabber said in an X post that the US launch would happen “in the coming weeks.” However, Polymarket is still in a beta phase rollout in the US, with no exact timeline for a full launch. 

Kalshi is benefiting from the first-mover advantage, having reportedly captured about 60% of total prediction market trading volume, although much of that is generated through its partnership with Robinhood. With traditional sportsbooks now entering the space, Polymarket has a lot of ground to make up to build brand recognition, liquidity, and user trust when it eventually goes live.

Failing to launch in Q1 2026 would be another significant missed opportunity, as the Super Bowl and March Madness are the most popular sporting events among US bettors every year.

Polymarket will have to think outside the box to try to upset the current top table. That means offering innovative markets and different types of contracts. For now, people can only join the waitlist until their number is called to register an account officially.

Sportsbooks Join the Competition

The traditional gambling sector in the US has rallied against the rise of prediction markets. The American Gaming Association (AGA) has claimed the emerging companies undermine consumer protection and state regulatory frameworks. State regulators believe these products should be defined as gambling and fall under their remit.

The CFTC maintains prediction markets are a form of financial derivatives, which means they can be available in all 50 states. That’s in contrast to sportsbooks, which need approval in each state where they want to operate.

That’s before considering that 20 states still don’t have legal online sports betting, including the country’s two most populated states, Texas and California. Traditional sportsbook operators are now entering the fray, as they don’t want to lose out on gaining a foothold in these major markets.

They’re trying to carefully toe the line between not upsetting state regulators they have existing relationships with, while also accessing new lucrative customer bases. DraftKings, for example, has launched DraftKings Predictions in 38 states, but sports contracts are options only in jurisdictions where it doesn’t already have a live sportsbook.

FanDuel has taken a different approach, initially launching in just five US states where sports betting isn’t legal. Finally, Fanatics launched in 24 states where it doesn’t already have a presence. Market observers will be watching closely in 2026 to see how much market share these traditional operators can take from the likes of Kalshi.

Crypto Exchanges Also Partaking

Everyone seems to be trying to get in on the prediction markets action. Crypto exchanges like Coinbase and Kraken recently announced plans to launch their own prediction market platforms. Others like Crypto.com and Gemini already have these products available to users.

Mainstream finance broker Robinhood is carving out an impressive slice of the market for itself. Robinhood Markets taps into its large retail base of about 27 million funded users, giving it immediate scale. Prediction markets are now the company’s fastest-growing revenue segment.

Coinbase is often seen as a crypto alternative to Robinhood, as it’s also very beginner-friendly. Tech researcher Jane Manchun Wong leaked screenshots in November of Coinbase’s under-development prediction platform before the company officially announced its launch. It was revealed on December 17 that a rollout would be imminent.

It’s time to launch is an issue, as Robinhood Markets has been around since March. Robinhood Markets also integrates nicely with everyday trading, alongside stocks, options, and crypto. It’s a natural extension of the overall trading experience. Coinbase’s user base is more crypto-focused and may be less familiar with financial products, such as derivatives.

Legal, Regulatory Challenges Persist

Regulatory uncertainty and legal conflicts surrounding prediction markets are some of the biggest talking points going into 2026. Major operators, such as Kalshi, are actively fighting state challenges. Kalshi is facing cease-and-desist orders in ten states, which has led to the company filing lawsuits in states such as New Jersey and Nevada.

There is also a proposed class-action lawsuit in New York against the company for allegedly offering unlicensed sports betting. Most of these cases are expected to drag on with no clear resolution in sight.

State regulators are trying to protect the tax revenue they receive from existing licensed gambling activities, such as sports betting. The AGA website features a ticker that updates in real-time, showing the tax dollars states have lost since sports prediction markets were introduced. At the time of writing, the total was over $200 million.

Despite these legal challenges, prediction markets are becoming more legitimized. Polymarket and Kalshi are now official partners of the NHL and Yahoo Finance, while the latter also has agreements with media outlets CNBC and CNN. 

The genie appears to be firmly out of the bottle, despite the efforts of state regulators. Only a Supreme Court decision looks strong enough to have the power to knock back the prediction sector.

Consolidation Looks Likely

The prediction markets gold rush has attracted a lot of interest from companies looking for their own slice of the pie. The entry of traditional sportsbook operators means there are now more than ten legitimate platforms to choose from, with additional options expected to be added to this list in the coming months.

The landscape looks very similar to when legal sports betting became a reality after the Supreme Court decided to end PASPA in May 2018. Some of the names that have already come and gone in the US sports betting scene in the intervening years include ESPN Bet, Sports Illustrated Sportsbook, Betfred, Betway, Tipico, Unibet, and FOX Bet.

The prediction markets space is also likely to consolidate once the winners and losers become clearer. There’s not enough room for everyone to thrive. That’s why big marketing spends are expected in 2026 from companies trying to capture as much market share as possible. 

Anyone who falls behind the competition will likely see the writing on the wall by the end of the year and depart the sector.