Prediction markets hit $188B record as Kalshi dominates, legal fights intensify

Prediction markets, enabling trades on $1 contracts based on future events, recorded $188 billion in the July-to-September period of 2026. The actual amount spent by buyers was considerably less than that total.

According to CryptoRank, the quarterly figure was almost 70% higher than the previous quarter. Kalshi is responsible for most of that volume, but US courts are divided over whether its main product constitutes gambling.

Is the Market as Big as It Looks?

The total volume counts each contract at its full possible payout, not the purchase price. Pew Research Center provides an explanation of the methodology.

“Each contract is counted at its $1 notional value, or the value of the contract if it is correct, rather than the price at the time of the trade,” Pew Research Center explained.

A contract bought for 20 cents therefore adds $1 to the volume figure.

DeFi Rate data indicates that Kalshi traders spent about $41 billion to acquire $142 billion in contracts during the last quarter. That amounts to roughly 29 cents per dollar of notional value.

At Polymarket, most individual traders lose money. Galaxy Research examined only accounts operated by humans, excluding bots.

“69.2% of the 2.9 million ‘retail’ accounts… finished below break-even,” Galaxy indicated.

Combined, those accounts had lost $338.9 million since 2020.

Why Courts are Fighting Over Kalshi’s Sports Contracts

Kalshi is a US exchange regulated by the Commodity Futures Trading Commission (CFTC). As recently as March, it shared roughly equal volume with rival Polymarket.

Then Kalshi moved ahead. DefiLlama data shows its weekly lead became permanent from mid-April.

Sports trading drove the growth. Pew found that Kalshi saw over $58 billion in sports trading during June and July alone. Across all platforms, sports represented 68% of buyer spending in the past month, according to DeFi Rate.

“Prediction markets volume reached a record $188B in Q3 2026, up nearly 70% QoQ and 21x higher than in Q3 2025. Kalshi was the main driver of the growth, with sports accounting for around 40% of its Q3 trading volume,” CryptoRank noted.

Ohio and Tennessee consider that activity gambling. A federal appeals court agreed on September 25. Another appeals court had previously ruled in Kalshi's favor in New Jersey.

The ruling allows Ohio and Tennessee to restrict where Kalshi sells sports contracts. Those contracts account for most of the sector's spending.

Meanwhile, Polymarket faces its own legal battle, including a lawsuit in New York over alleged illegal gambling.