Prediction Markets Grew 4X to $63.5B in 2025, But Risk Structural Strain: CertiK

Core Insights - The prediction market sector is experiencing significant growth, with trading volumes quadrupling from $15.8 billion in 2024 to approximately $63.5 billion in 2025, but this growth is accompanied by structural strains and regulatory challenges [1][2]. Market Activity - Trading volumes are heavily concentrated around three dominant platforms: Kalshi, Polymarket, and Opinion, raising concerns about the sustainability of this growth as it is driven more by incentives and event-driven spikes rather than organic demand [2]. - CertiK's report indicates that wash trading on Polymarket surged in 2024, reaching nearly 60% of reported volume, which inflated liquidity metrics but did not significantly distort price reliability [3][6]. Price Formation and Market Integrity - The distinction between inflated activity and broken markets hinges on whether artificial trading impacts price formation rather than just volume reporting [4]. - Key indicators of potential market manipulation include persistent price divergence between platforms, probability movements without corresponding news, and systematic biases in pricing outcomes [5]. Security Challenges - The rapid growth of prediction markets has outpaced the development of their security architecture, leading to structural weaknesses that could become more significant as user bases expand [8]. - CertiK warns that lower-liquidity markets may become increasingly vulnerable as more sophisticated traders enter the space, potentially exacerbating security issues [7].