Prediction markets have already broken out – and most crypto traders are still showing up late.

In November 2025, Kalshi and Polymarket did nearly $10B in combined monthly volume. December jumped to about $13B. By early 2026, TRM Labs had the space trending toward roughly $21B a month.

This went from niche to huge, fast. Vlad Tenev described event contracts as Robinhood’s fastest-growing product in company history, running at a $300 million-plus annual rate. DraftKings and FanDuel moved in during December 2025.I

Intercontinental Exchange (ICE)  committed up to $2 billion to Polymarket, completing the final $600 million tranche in March 2026 – the same month Kalshi raised over $1B at a $22B valuation – about double where it was just three months earlier.

It’s the usual sequence: traders show up first, then the big players, then the pipes get built out. Crypto traders watched the same movie with derivatives years ago.

What’s different now is that prediction markets already offer continuous price discovery on real-world events with real, measurable liquidity. Yet inside a typical CEX account, the category barely exists. Most active traders didn’t participate while it scaled, largely because getting in requires navigating infrastructure that was built for Web3 users, on a stablecoin most CEX traders do not hold, through a wallet most of them do not have.

So how did that gap open up? Here are five reasons.

1. The wallet requirement kills the trade before the trade begins

Polymarket runs on the Polygon blockchain and settles through Polygon-based collateral infrastructure. For a CEX-based trader holding USDT, getting to the first trade means creating a self-custodial wallet, sourcing the correct assets on the correct chain, and completing an on-chain deposit. Polymarket introduced a Bridge API to simplify this process – it now accepts multi-chain deposits – but settlement still routes through its Polygon environment.

For most CEX traders, this is where the effort ends. Before touching a single market, they are navigating wallet architecture and cross-chain mechanics that their existing workflow never required. The product is gated, and most people will not push through that gate for one new product category.

2. The stablecoin gap adds friction at every step

Stablecoin structure matters here. USDT dominates trading on centralized exchanges. USDC is stronger in regulated and institutional flows. What matters in practice is simple: which asset sits in a trader’s account when they are ready to trade.

That difference creates a quiet tax. When a product asks a trader to convert out of the balance they already use, pay the conversion and transfer costs, and keep track of another settlement rail, participation drops. Web3-native users absorb that step almost automatically. A broad CEX audience rarely does. The result is strong liquidity on the platform and a thin on-ramp from where most crypto traders actually sit. 

3. Switching platforms means temporarily losing your edge

Every platform switch carries a cognitive cost. A trader who already has execution routines inside one exchange knows where size sits, how positions display, how risk updates, and how fast they can move between products. Prediction markets ask that trader to learn a different layout and logic for one product line. Polymarket’s documentation frames the venue as an open peer-to-peer market with blockchain settlement, which precisely changes the workflow.

That learning curve looks manageable but in practice, most active traders protect attention the same way they protect capital. A separate wallet plus a separate interface for a single category asks for more retraining than most people will accept, even when they like the trade itself.

4. Liquidity is concentrated where access is constrained

Market share concentration tells one side of the story. Keyrock and Dune found that Kalshi and Polymarket accounted for 97%+ combined market share, with smaller venues far behind. Access tells the other side. Polymarket’s help center currently lists 33 fully restricted countries.

In the U.S., Polymarket secured CFTC approval in November 2025 for intermediated market access through regulated brokerage channels. Kalshi is federally regulated across the U.S., yet it continues to face state-level legal fights. For a trader, the problem is simple: the liquidity pool is there, yet usable access depends on where you sit and which channel you use.

5. Prediction markets are covered as gambling. They trade like futures

Mainstream coverage still frames prediction markets through the language of betting. That framing hides the actual mechanics. On Polymarket, users trade against one another in an open market, and the platform describes it as peer-to-peer trading. That distinction matters because a trader and a bettor respond to very different incentives – entertainment vs management. Until the narrative catches up with the structure, a large part of the crypto trading audience will keep dismissing the category before they ever study the instrument.

So what breaks the deadlock?

Prediction markets today look a lot like crypto derivatives did in the 2018-2019 phase: the product exists, liquidity is real, and institutional interest has already shown up ahead of mass retail integration. ICE disclosed a $600 million investment in Polymarket as part of a plan to invest up to $2 billion. Robinhood partnered with Susquehanna International Group to expand its prediction-markets infrastructure, while firms like Jump Trading have been cited as liquidity providers in the space.

What’s missing is a simple on-ramp: let traders tap these markets from the CEX account they already use, with the collateral they already hold.  Whoever closes that gap first takes a category that analysts project will reach trillion-dollar annual volume by the end of the decade.

Some exchanges are already moving in that direction. Phemex has launched a prediction market product on April 22, 2026, powered by Polymarket. This isn’t positioned as a separate Web3 experience. It sits directly inside the existing Phemex account, where users can take simple YES/NO positions on outcomes ranging from crypto milestones to macro events, all settled in USDT.

Access through an exchange account removes the need for a separate wallet setup and compresses the onboarding flow into something familiar. It also aligns collateral with what traders already hold, which is where most of the friction has sat.

If that model holds, prediction markets start to integrate into existing trading infrastructure. At that point, participation becomes a question of interest – and historically, that is where new product categories tend to scale fastest.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

Featured image via Shuttertsock.