Pitchbook: Prediction Markets to Add New Finance Layer

In its 2026 state of the fintech industry report, Pitchbook outlined how prediction markets are gaining legitimacy. Yang argued that their core function is to aggregate diverse beliefs into a single probability. Markets with strong volumes and liquidity tend to produce probabilities that align closely with real outcomes, he wrote. The report highlights the intersection of these markets with decentralized finance, which offers liquidity and automated settlement via smart contracts, and artificial intelligence, which can use market data to surface new signals and inform investment positioning.

Legacy and fintech firms are actively entering the space. Goldman Sachs CEO David Solomon confirmed in a January 2026 earnings call that the firm is exploring its options and has met with leading prediction market companies. Meanwhile, Coinbase acquired prediction markets firm The Clearing Company in December 2025 as part of its diversification strategy. Similarly, Robinhood launched a futures product in October 2024 and has seen significant growth. CEO Vladimir Tenev reported that prediction market volumes more than doubled yet again, with over 12 billion contracts traded in 2025. He added that customers have already traded over 4 billion contracts in early 2026.

The growth of prediction markets faces a significant hurdle: regulatory uncertainty. Nationwide lawsuits are debating whether these platforms should be regulated as financial exchanges by the Commodity Futures Trading Commission (CFTC) or as state-licensed gambling operations. Currently, CFTC oversight allows platforms like Kalshi and Polymarket to operate in states where sports betting may be illegal. CFTC Chairman Michael Selig has expressed support for the sector, stating in late January, It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets.

The primary uncertainty is how prediction markets will be legally classified. The outcome of ongoing lawsuits will determine whether they fall under federal financial oversight or state-level gambling laws, which could significantly alter their operational scope. Furthermore, while high-profile figures like Donald Trump Jr. have invested in platforms like Polymarket, the exact financial details of such investments remain undisclosed.

Regulatory bodies are expected to provide more clarity soon. On February 12, Securities and Exchange Commission Chair Paul Atkins acknowledged to the Senate Banking Committee that there is overlapping jurisdiction potentially with the CFTC. He stressed the need for harmonized regulation, signaling that inter-agency discussions will likely shape the future legal framework for these markets.

Observers can monitor this evolving sector by tracking public statements from the CFTC and SEC. Reviewing quarterly earnings calls from publicly traded companies like Robinhood and Coinbase may offer insight into their product strategies and volume growth. Finally, it is important to understand the distinction between notional volume and the actual capital at risk when evaluating market activity reports.