Prediction markets will grow to $1 trillion by 2030, Bernstein estimates

Bernstein estimates prediction market volumes will reach $240 billion in 2026, up 370% from 2025, and expand to $1 trillion annually by 2030 on roughly 80% CAGR. Kalshi and Polymarket already generated about $60 billion in year-to-date volume, while Kalshi's weekly trading volume has surged to more than $3 billion from about $100 million a year ago. The outlook is constructive for Kalshi, Polymarket, and public proxies Robinhood and Coinbase, though ongoing legal challenges in 14 states and four pending congressional bills remain a material overhang.

Analysis

The equity winners are not the obvious ‘prediction market’ pure-plays — they are the distribution layers with cheap user acquisition and embedded wallet/share-of-app. HOOD is the highest-beta beneficiary because it can monetize event trading as a habit-forming product that increases frequency, balances, and options-like engagement; if this stays live into year-end, the business mix shifts toward higher-RPU, lower-churn activity. COIN benefits second-order through stablecoin rails, custody adjacency, and the broader normalization of on-chain financial speculation, but it is more of an infra pick than a direct take-rate story.

DKNG is the key competitive loser if event contracts become a substitute for same-game parlays or a cheaper hedge on sports outcomes. The risk is not volume cannibalization alone; it is that prediction markets compress the willingness-to-pay for sportsbook vig, forcing promotions and margin spend higher across the sector. That pressure would show up first in cohort quality and promo intensity over the next 2-3 quarters, not immediately in headline handle.

The biggest underappreciated catalyst is regulatory “permissioning” rather than growth. Once federal clarity hardens, the addressable market likely expands from retail speculation into corporate hedging and macro/event exposure, which creates a much stickier, higher notional product set and favors platforms with compliance-ready distribution. The main tail risk is a state-level injunction or adverse CFTC ruling that freezes product innovation; that would hit multiples before it hits revenue, because the market is capitalizing a multi-year platform option.

Consensus may be underestimating how quickly this becomes a payments, custody, and data monetization story rather than a binary gambling story. But the market may also be overestimating near-term monetization: volumes can compound faster than economics if spreads compress and customer acquisition costs rise. That argues for owning the platform with the best cross-sell engine, while fading the assumption that all volume growth converts linearly into revenue.

Key Decisions for Investors

• Long HOOD into the next 3-6 months; best asymmetric exposure to prediction-market adoption plus engagement lift. Use call spreads if you want defined risk: buy 6-9 month upside against a modest delta hedge, because the re-rating can come before revenue fully inflects.
• Pair trade long HOOD / short DKNG for a 1-2 quarter horizon. Thesis: HOOD monetizes event trading as a general engagement layer, while DKNG faces structural margin pressure if event contracts siphon the most price-sensitive bettors.
• Add COIN on pullbacks as a second-order beneficiary, not a direct volume proxy. Favor common over short-dated calls; the setup is slower-burn and benefits from broader crypto + event-trading normalization over 6-12 months.
• Avoid chasing BAC purely as a proxy. It should see sentiment lift via fintech/regulatory optimism, but the earnings beta is too indirect; better as a basket hedge than a standalone long.
• Watch for legal headlines as a catalyst to fade volatility, not fundamentals. If adverse state/CFTC action hits, consider reducing HOOD first — it has the highest embedded option value and will de-rate fastest on a regulatory shock.