Prediction Markets Are No Longer a Curiosity—Wall Street Is Paying Attention

Note: This post was written by Claude Opus 4.5. The following is a synthesis of reporting from major financial and technology news organizations.

Goldman Sachs CEO David Solomon made an unexpected announcement during the bank’s fourth-quarter earnings call this week: he’s personally been meeting with prediction market companies.

“The prediction markets are also super interesting,” Solomon said. “I personally met with the two big prediction companies and their leadership in the last two weeks and spent a couple of hours with each to learn more about that. We have a team of people here that are spending time with them and are looking at it.”

When the CEO of a $180 billion Wall Street bank starts spending hours learning about a new asset class, it’s worth understanding what he’s looking at.

What Are Prediction Markets?

Prediction markets let people trade contracts on the outcomes of future events. If you believe the Seahawks will win Super Bowl LX, you can buy a contract that pays out if they do. If you think inflation will exceed 3% next quarter, there’s a contract for that too. Prices reflect the crowd’s collective probability estimate—a contract trading at 65 cents implies a 65% chance of that outcome.

The concept isn’t new. Gambling odds on elections appeared in newspapers like The New York Times in the early 1900s. The University of Iowa launched the Iowa Electronic Markets in 1988 to track elections, and it proved remarkably accurate. Companies like Google, HP, and Eli Lilly have used internal prediction markets for years to forecast product launches, clinical trial outcomes, and strategic decisions.

What’s new is the scale.

The Numbers Are Getting Hard to Ignore

Two platforms dominate the space: Kalshi (US-regulated, CFTC-approved) and Polymarket (crypto-based, offshore). Their growth has been staggering:

Kalshi went from $300 million in trading volume in 2024 to $50 billion annualized in 2025—a 166x increase. The company just raised $1.1 billion at an $11 billion valuation.
Polymarket received a $2 billion investment from Intercontinental Exchange (the NYSE’s parent company) at a $9 billion valuation.
Combined weekly volume now regularly exceeds $5 billion. In the week ending January 12, 2026, both platforms set new weekly records.
The 2026 midterm elections already have over $8 billion positioned across House and Senate control markets.

For context, that $5 billion weekly volume is still tiny compared to traditional financial markets—Tradeweb alone processes $2.8 trillion in average daily volume. But it’s no longer a rounding error either.

How Does This Compare to Other Gambling?

US commercial gaming (casinos, sports betting, iGaming) generated $64.3 billion through October 2025. Sports betting alone hit $1.6 billion in revenue in October on $17.8 billion in handle.

Prediction markets are approaching sports betting’s scale. Kalshi processes over $2 billion weekly—roughly comparable to a busy month of sports betting handle compressed into seven days. The difference: prediction markets cover everything from Federal Reserve decisions to Oscar winners to whether specific legislation will pass.

Are They Actually Accurate?

Research consistently shows prediction markets outperform polls, especially in the weeks before an election. A study in the Journal of Judgment and Decision Making found that over the full campaign period, markets have half the forecast error of polls.

The 2024 election offered a high-profile test. Polymarket showed Trump as the clear favorite throughout October and November 2024, while most polling aggregates showed a toss-up. Trump won. This doesn’t prove markets are always right—they’re not—but it demonstrated their ability to aggregate information that traditional polling missed.

The mechanism is straightforward: people with better information have financial incentive to trade on it, moving prices toward accuracy. As economist Friedrich Hayek argued in 1945, markets synthesize dispersed knowledge that no single analyst could possess.

Why Goldman Cares

Solomon framed prediction markets as potential derivatives: “When you think about some of these activities, particularly when you look at some of the ones that are CFTC regulated, they look like derivative contract activities.”

This is the key insight. A contract on whether the Fed will raise rates isn’t fundamentally different from an interest rate swap. A contract on oil prices hitting a certain level resembles an options contract. Goldman sees potential for institutional-grade hedging products, not just retail speculation.

The bank isn’t rushing in. Solomon cautioned that “the pace of change might not be as quick and as immediate as some of the pundits are talking about.” But having a dedicated team studying the space signals serious interest.

The New Professionals

Prediction markets have spawned a class of full-time traders. NPR profiled two: Logan Sudeith, 25, who made $100,000 in a single month (including $40,000 from correctly predicting Time’s Person of the Year), and Evan Semet, 26, who quit finance to trade prediction markets full-time using statistical models running on AWS. Both report working 100-hour weeks.

CNN, CNBC, and the Wall Street Journal now incorporate prediction market odds into their coverage. The Golden Globes displayed Polymarket odds during commercial breaks.

Should Regular People Pay Attention?

As an information source: Yes. Prediction markets aggregate real-money opinions into a single probability number. When you see “70% chance of X,” that means people with actual money on the line collectively believe X is likely. It’s not gospel, but it’s a useful data point—often more useful than pundit speculation.

As an investment: That depends on your risk tolerance and edge. These are zero-sum markets. For every winner, there’s a loser. The traders making six figures are doing it by outworking and out-modeling everyone else. Casual participants are likely providing liquidity to sharper players.

As a trend: Definitely. When Goldman Sachs, the NYSE’s parent company, and major media outlets all take prediction markets seriously in the same year, something structural is shifting. Whether these platforms become mainstream financial infrastructure or remain a niche depends on regulation, but the direction is clear.

The $50 billion question isn’t whether prediction markets matter. It’s whether they’ll be regulated like casinos, like derivatives exchanges, or as something entirely new. Goldman is betting it’s the latter.