Prediction markets revenue could top $10B by 2030, according to Citizens

Prediction markets could generate more than $10 billion in annual revenue by 2030, up from a current run rate of nearly $2 billion, as institutional investors increasingly adopt event-based contracts, according to a report by Citizens analysts.

Monthly trading volumes in prediction markets are currently around $10 billion, the report said, a fraction of the more than $10 trillion generated each month by U.S. equities. Still, Citizens estimates the underlying event-sensitive exposure base exceeds $500 trillion, providing significant scope for growth.

“As volumes compound and spreads compress, the fee model remains attractive given near-zero marginal listing/settlement costs,” the analysts wrote.

Citizens estimates that about $400 million of current prediction market revenue is generated by Robinhood Markets, where yes-or-no event contracts have become the brokerage’s fastest-growing business line. Robinhood handled 5.5 billion event contracts in October and November, the report said.

Market leaders Kalshi and Polymarket processed $10 billion in notional volume in November, handling between 15 billion and 20 billion contracts combined. The two platforms have attracted 11-figure valuations, which have drawn some criticism.

The analysts said institutional use cases are expected to drive future liquidity and revenue growth, as prediction markets allow investors to trade discrete events without the basis risk embedded in traditional hedging instruments.

“Event-driven hedge funds can isolate deal, litigation, and regulatory outcomes without embedding beta or duration; macro funds can hedge inflation prints, policy decisions, and geopolitical catalysts directly; quant firms can treat probability curves as high-signal inputs; and corporates can use markets for timing capital raises, planning, and investor-relations signaling,” the report said.

Citizens argued that binary event contracts can provide cleaner hedges than sector exchange-traded funds or index options, addressing inefficiencies in trading outcomes such as economic data releases, regulatory decisions, and mergers.

The analysts said prediction markets solve a longstanding inefficiency by allowing investors to express views on discrete events without the cross-factor basis risk embedded in traditional hedging instruments.

The sector remains dominated by retail participants, but Citizens said growth is occurring at a pace “rarely seen in new financial products,” describing the industry as being in a “foundational phase.” Sports and entertainment account for more than half of global contract counts, though non-sports markets are expected to grow faster and eventually dominate notional value.

The report drew parallels with the early adoption of equity options, exchange-traded funds, credit default swaps, and interest rate swaps, which initially reached about five basis points of underlying market capitalisation. Applying similar ratios implies an early institutional opportunity of $250 billion to $500 billion in notional exposure.

“We believe these ranges reflect the natural frictions of institutional onboarding, considering documentation, risk models, capital-treatment interpretation, liquidity maturation, and operational readiness,” the analysts said.

Citizens noted that the competitive landscape has broadened to include regulated exchanges, blockchain platforms, brokerages, digital asset exchanges, and sports betting operators. Robinhood’s acquisition of derivatives exchange MIAX was described as a key moment in the market’s maturation.

Regulatory uncertainty remains the largest constraint, particularly amid jurisdictional tensions between U.S. federal and state authorities over sports-linked markets. Liquidity fragmentation, insider information risks, and outcome ambiguity were also cited as challenges.

Despite these risks, Citizens managing director Devin Ryan said prediction markets are on track to become a mainstream financial instrument.

“[P]rediction markets appear poised to become a durable and high growth part of global capital markets and financial architecture,” Ryan wrote, adding that the sector could transition “from primarily a speculative curiosity today … to a mainstream financial tool.”