Bernstein: Predictive markets are transforming into "information trading" giants; is the trillion-dollar trading volume inflection point here?

Brokerage firm Bernstein’s latest report highlights that prediction markets are undergoing a paradigm shift—from their origins in political and sports betting to evolving into a broad “general information trading platform” that encompasses economic, cultural, and financial indicators. The report emphasizes Kalshi’s role as a regulated pioneer and its partnership with Robinhood, which handled up to $2.5 billion in prediction market trading volume in October, translating to an annualized revenue of $300 million. Analysts believe that with clearer regulation, institutional participation, and tokenization accelerating, prediction markets are becoming a new frontier for the integration of crypto and traditional finance.

Prediction Markets: From “Q&A Games” to Price Engines for Information Value

Trend Confirmation: Information Arbitrage as a Main Driving Force

Bernstein analysts explicitly state in a client report that the nature of prediction markets (like Kalshi and Polymarket) is fundamentally changing: they are evolving into broader information markets. Demand has shifted beyond simple political or sports outcomes to include macroeconomic indicators, corporate activities, and even cultural trends.

Prediction markets allow users to trade Yes/No contracts on whether an event will happen, with contract prices directly reflecting the implied probability of specific outcomes. This mechanism’s value lies in its ability to rapidly incorporate all available information—whether from the crypto community or traditional financial analysis—into prices, creating an efficient tool for information arbitrage.

Diverging Regulatory Paths Converge: Intense Competition Between Kalshi and Polymarket

The current “battlefield” is primarily between Kalshi and Polymarket. Their approaches differ significantly but are now converging:

• Kalshi: Adopts a “regulation-first” centralized approach, having obtained key licenses from the U.S. CFTC and legally secured the right to list certain political contracts. To expand global liquidity, Kalshi is accelerating blockchain integrations, especially through partnerships with Solana and Base, to attract international users outside the U.S.
• Polymarket: Originally a decentralized platform built on Polygon, it quickly became the largest prediction market globally. However, as of September 2025, data from The Block shows Kalshi’s monthly trading volume at $4.4 billion, surpassing Polymarket’s $3 billion. Polymarket is actively preparing for a U.S. relaunch by acquiring QCEX, a clearing entity, to meet KYC requirements, and plans to launch its native POLY token.

The competition is shifting from a “compliance vs. decentralization” debate to a race to see who can more rapidly onboard global users and capture crypto liquidity.

Retail Giants Enter the Arena: Robinhood and Coinbase’s Reshaping Plans

Robinhood’s Explosive Trading Volume: Driving an Estimated $300 Million in Annual Revenue

Bernstein emphasizes Robinhood’s critical role in driving growth in this category. As Kalshi’s “anchor partner,” Robinhood has listed over 1,000 prediction market contracts, accounting for 57% of Kalshi’s total trading volume in October.

The report notes Robinhood processed $2.5 billion in prediction market trades last month—more than the $2.3 billion it handled in the entire third quarter. If this pace continues, it could generate an annualized revenue of $300 million. This indicates that prediction markets are gaining mainstream acceptance through retail brokerage channels.

Additionally, Coinbase has articulated its “Everything Exchange” vision, aiming to integrate prediction markets into its platform covering cryptocurrencies, tokenized stocks, and stablecoins. Analysts expect Coinbase to make a major announcement during its upcoming December 17 corporate event.

Institutional Ratings and Risk Considerations

Bernstein rates both Robinhood and Coinbase as Outperform, with target prices of $160 and $510, respectively. This reflects strong confidence on Wall Street in the tokenization of financial products and information trading.

However, analysts also warn of risks:

• Liquidity in some markets remains shallow.
• Complex order books could cause user experience friction.
• Regulatory approval scope may be limited, constraining scale.

If platforms like Robinhood cannot simplify contract processes enough to make them accessible to casual sports bettors, prediction markets may remain niche.

Conclusion

Prediction markets are at a historic crossroads, becoming a testing ground for the fusion of crypto technology with traditional finance—especially in sports betting and political trading. The competition between Kalshi and Polymarket is driving innovation, while the deep involvement of traditional giants like Robinhood is injecting unprecedented mainstream liquidity and user education. For the industry, the rise of prediction markets signifies more than just volume growth; it indicates that real-time information pricing mechanisms are being embraced by mainstream finance, hinting at a future where financial derivatives become more granular and sophisticated.