The landscape of global finance reached a definitive turning point in late 2025, as prediction markets shed their reputation as "crypto-native niches" to become a cornerstone of the institutional financial stack. This transformation was signaled most loudly by the Intercontinental Exchange (NYSE: ICE), the parent company of the New York Stock Exchange, which finalized a staggering $2 billion strategic investment in Polymarket in October 2025. The deal, which valued the platform at $9 billion, effectively signaled to the world that "Information Finance" (InfoFi) is no longer a speculative experiment but a critical utility for the 21st-century economy.

As of February 1, 2026, prediction markets are no longer just about calling election winners or sporting results; they are being utilized as real-time "truth engines" for everything from Federal Reserve policy shifts to corporate merger success rates. With liquidity exploding and institutional heavyweights like Susquehanna International Group (SIG) and Jane Street taking massive positions, the market-implied probability is now often cited alongside the S&P 500 as a primary indicator of global sentiment.

The Market: What's Being Predicted

The sheer scale of prediction market activity has reached levels that were unimaginable just two years ago. In 2024, the industry celebrated a cumulative volume of $9 billion, largely driven by the U.S. presidential cycle. By the end of 2025, that figure had skyrocketed to $63.5 billion—a massive 302% year-over-year increase. In January 2026 alone, Polymarket recorded over $5 billion in trading volume, cementing its position as the world's largest event-based liquidity pool.

This growth is anchored by two primary platforms: Polymarket and Kalshi. While Polymarket dominated international and crypto-settled volume, its mid-2025 acquisition of QCEX—a CFTC-licensed exchange and clearinghouse—allowed it to legally re-enter the U.S. market under a regulated framework. Meanwhile, Kalshi has seen its own surge in institutional volume, particularly in "macro-contracts" where traders bet on inflation prints, GDP growth, and interest rate decisions. The average trade size has evolved from a retail-centric $300 in early 2024 to nearly $4,800 today, reflecting the heavy participation of algorithmic funds and high-net-worth desks.

Resolution criteria have also become more sophisticated. Gone are the days of ambiguous headlines; most institutional contracts now settle against hard data feeds from government agencies or agreed-upon third-party auditors. The integration of these markets into platforms like ICE Connect means that a trader in London can now see a real-time probability of a corporate acquisition failing as easily as they can see a stock price, with settlement timelines often occurring within minutes of a verifiable event.

Why Traders Are Betting

The institutionalization of this space is being led by the "big three" of market making: Susquehanna International Group (SIG), Jane Street, and Jump Trading. SIG, in particular, has become the primary institutional market maker for Kalshi, ensuring deep liquidity for contracts that were once too thin for professional use. These firms aren't just betting on outcomes; they are engaging in complex "cross-platform arbitrage." By exploiting the 4–6 cent price gaps between Polymarket’s crypto-settled contracts and Kalshi’s fiat-settled contracts, they provide the friction-reducing liquidity that has stabilized these markets.

Beyond arbitrage, a new strategy known as "Meta-Contract Hedging" has emerged among firms like Jane Street. These desks reportedly use prediction markets to hedge platform-specific or systemic risks. For example, if a firm has a large directional exposure to a specific commodity, it may take an offsetting position in a prediction market contract regarding geopolitical stability in a key producing region. This allows for a more granular form of insurance than traditional options or futures might provide.

Traditional forecasting methods—such as political polling or expert analyst consensus—are increasingly viewed as "lagging indicators" compared to the prediction market "lead." In the recent January 2026 Federal Open Market Committee (FOMC) cycle, prediction markets accurately priced in a "hawkish pause" three days before the leading Wall Street analysts updated their client notes. This speed and accuracy have made these markets an irresistible tool for any desk seeking an informational edge.

Broader Context and Implications

The shift toward prediction markets marks the birth of "InfoFi," a term coined by industry insiders to describe the financialization of information. This trend suggests that the most valuable commodity in the modern economy is not capital, but accurate, real-time data. By putting a price on the truth, these markets create a financial incentive for individuals with "hidden information" to bring it to the public square, effectively Air-dropping the role of the expert analyst.

Regulatory clarity has played a pivotal role in this evolution. In January 2026, the newly appointed CFTC Chairman, Michael Selig, officially withdrew previous proposals to ban event contracts. Selig’s "Planting the Flag" announcement characterized prediction markets as vital for "price discovery and aggregating dispersed information." This federal endorsement has largely silenced the legal uncertainty that plagued the sector in 2022 and 2023, though some state-level friction persists in jurisdictions like Nevada and Connecticut regarding sports-related event contracts.

Real-world implications are already being felt in corporate boardrooms. Companies are now using prediction markets as a form of "decision support." A major logistics firm might monitor the "Suez Canal Blockage Risk" market to decide whether to reroute ships, while tech giants are using internally-run prediction markets to gauge whether a product will launch on schedule. This represents a fundamental shift in how organizations manage risk and allocate resources.

What to Watch Next

The next major milestone is the full integration of prediction market data into consumer-facing technology. Alphabet Inc. (NASDAQ: GOOGL) has already begun testing "Market Probabilities" within its search results, treating prediction market odds as more authoritative than traditional news headlines for breaking events. If this goes wide, the "Wisdom of the Crowds" will become the default lens through which the average person views the future.

We are also anticipating a wave of further consolidation and public offerings. Following the ICE-Polymarket deal, rumors are circulating that Robinhood Markets, Inc. (NASDAQ: HOOD), in partnership with SIG, may look to spin off its recently acquired prediction exchange (formerly MIAXdx) into a standalone public entity by late 2026. This would provide retail investors with a direct way to play the growth of the infrastructure itself, rather than just the individual contracts.

Finally, keep an eye on "Climate Prediction Markets." As global weather patterns become more volatile, insurance companies are looking to these platforms to create "Parametric Climate Contracts." These would allow farmers or coastal businesses to hedge against specific weather events (like a Category 4 hurricane hitting a specific zip code) with near-instant payouts, bypassing the months-long claims process of traditional insurance.

Bottom Line

Prediction markets have officially crossed the chasm from a hobbyist fascination to a core global financial utility. The entry of Intercontinental Exchange (NYSE: ICE) and the active participation of firms like Jane Street and Susquehanna have provided the capital and credibility necessary to turn these platforms into "truth engines." What we are witnessing is the democratization of forecasting—a world where the collective intelligence of the market is more powerful than any single institution.

As we move deeper into 2026, the distinction between a "financial market" and a "prediction market" will continue to blur. Whether you are a hedge fund manager protecting a billion-dollar portfolio or a retail trader looking for the most accurate news, the "market-implied probability" is now the gold standard of truth. The institutionalization of this space is not just a win for traders; it is a win for clarity in an increasingly uncertain world.

This article is for informational purposes only and does not constitute financial or betting advice. Prediction market participation may be subject to legal restrictions in your jurisdiction.

PredictStreet focuses on covering the latest developments in prediction markets.
Visit the PredictStreet website at https://www.predictstreet.ai/.