Prediction Markets: They Grow Up So Fast

• Prediction markets diversifying fast beyond elections and sports.
  • Sports = 80% volume but all-time low share; entertainment/crypto/culture growing faster.
  • Better retention in non-sports categories signals sticky use cases.
• Wall Street treating prediction markets as pricing infrastructure for uncertainty.
  • Goldman Sachs focused on macro events and CPI prints.
  • Tradeweb envisions dedicated trading desks; financial contracts as anchors.
• Prediction markets solve the benchmark problem for political/economic events.
  • Standardized pricing lets institutions hedge directly, not via correlated assets.
• Three-stage institutional adoption: data integration → compliance onboarding → active risk-laying.
  • Most institutions still at stage one; few reach self-reinforcing liquidity at stage three.
• 100% collateral requirement is the key structural barrier; Kalshi got NFA margin license.
• Normalization signals: Congress citing Kalshi odds, party committees using data as standard inputs.
• Endgame: prediction markets become mundane infra — like options post-1970s regulation.

Alex Immerman & Santiago Rodriguez, a16z Growth · 2026-04-16 · Read on a16z.com