From a "preemptive bet" transaction, understanding the hottest Web3 track of 2025: Prediction Markets

I. Introduction

In early January Beijing time, a piece of news circulated on overseas social platforms and within multiple crypto communities: the U.S. government had taken a firm stance regarding the situation in Venezuela, with related developments drawing significant international attention. Almost simultaneously, a transaction record on a decentralized prediction platform was rapidly amplified and discussed by the market.

Data shows that over a brief four-day period starting December 27, 2025, a specific account on the prediction market platform Polymarket accumulated an investment of approximately $32,537, continuously betting on the event that "Venezuelan President Maduro will step down before January 31." Notably, this account concentrated on building a large position several hours before the related news was widely discussed externally.

At that time, the market's overall pricing for the probability of the related event occurring was not high, around 6%. As the situation evolved and official U.S. statements were released, the price of the position held by this account rapidly increased, ultimately realizing paper profits exceeding $400,000, with the return rate reaching over tenfold at one point.

Whether this trade involved insider information remains subject to further investigation by regulators and the platform. However, it is sufficient to raise a question—what exactly is this frequently mentioned Polymarket? And why did prediction markets rapidly gain popularity in 2025?

This article will use this event to systematically introduce this rapidly expanding Web3 sector.

II. What is a Prediction Market? Why Can It "Aggregate Collective Intelligence"?

A prediction market is, in essence, a mechanism that aggregates dispersed information through financial incentives.

In a prediction market, participants need to use real funds to trade on the outcome of a specific event. As different judgments continuously compete in the market, the price gradually converges to a level reflecting the "collectively judged probability." This mechanism allows prediction markets, in certain scenarios, to come closer to the true outcome than traditional surveys or subjective judgments.

This advantage was fully demonstrated during the 2024 U.S. presidential election. Prediction market platforms, represented by Polymarket, showed probability judgments on election outcomes that were significantly ahead of traditional polling agencies at multiple key junctures. After the final results were confirmed, their predictive accuracy was also validated retrospectively.

As credibility continues to accumulate, prediction markets have begun to be cited more widely:

• Mainstream financial media (such as Bloomberg) directly reference their odds data in reports;
• Search engines and AI Q&A products (such as Perplexity) display prediction market results as reference information;
• Prediction markets are gradually transitioning from an "internal tool within the crypto community" to one of the public information sources.

From a market size perspective, industry growth is equally significant. Multiple research institutions estimate:

• The total trading volume of prediction markets in 2025 is expected to grow from approximately $9 billion in 2024 to $40 billion;
• User base is projected to grow from about 4 million to 15 million;

At the capital level, prediction markets have also received high recognition. In 2025, two platforms, Polymarket and Kalshi, have attracted over $3.15 billion in cumulative funding, holding an absolute dominant position in the industry. In October 2025, the Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, announced a strategic investment in Polymarket, pushing its valuation into the $8–9 billion range. Meanwhile, Kalshi has also completed multiple large funding rounds, with investors including several global leading institutions.

Amidst the convergence of multiple factors, prediction markets are widely regarded as one of the most representative Web3 sectors in 2025.

III. Prediction Market ≠ Gambling: The Fundamental Differences Between the Two Mechanisms

As the popularity of prediction markets rises, a common controversy also emerges: are prediction markets merely "gambling in a different shell"?

From the underlying mechanism, there are fundamental differences between the two.

1. Different Price Formation Mechanisms

Prediction markets adopt a market-driven pricing logic. Prices are formed through the interplay of buyers and sellers in an open order book. All transaction data is auditable. The platform itself does not set probabilities nor bear outcome risks; it only collects transaction fees.

Gambling platforms, however, set odds internally. The internal calculation logic is not transparent, and they ensure long-term profitability through the "house edge." The goal of adjusting odds is not to discover true probabilities but to control platform risk.

2. Differences in Function and Purpose

The price generated by a prediction market is essentially a data product that can be used externally. It can be applied in scenarios such as macro event judgment, policy expectation analysis, and enterprise risk management, and can even inversely influence media narratives and decision-making references.

Gambling behavior primarily falls under entertainment consumption. Its odds do not possess spillover value nor serve an information discovery function.

3. Differences in Participant Structure

Liquidity in prediction markets comes from information-driven participants, including researchers, macro traders, data analysts, and institutional users. Their core goal is to arbitrage and discover prices using information asymmetry.

Liquidity in gambling markets mainly comes from ordinary consumers, who are more easily driven by emotions and preferences, with information accuracy not being the core objective.

For these reasons, prediction markets are often viewed as a form of "information liquidity market," rather than traditional entertainment gambling.

IV. Why Did Prediction Markets Explode in 2025?

Prediction markets are not a new concept; their theoretical foundations can be traced back to the last century. However, achieving scaled growth truly relied on the maturation of multiple external conditions in 2025.

First, there was a key breakthrough at the regulatory level. The U.S. Commodity Futures Trading Commission (CFTC) gradually clarified the compliant positioning of prediction markets, defining them as falling under commodity derivatives rather than gambling activities. This change allowed prediction markets to be distributed through broader channels. Post-compliance, the coverage of prediction markets in the U.S. even exceeds that of some traditional gambling businesses, reaching all 50 states.

Second, there was a restoration of institutional confidence and capital inflow. Once the compliance boundaries were clarified, the financing paths for prediction market platforms rapidly widened. Multiple large funding rounds provided support for product experience, liquidity, and risk control systems.

Third, there was an expansion in event categories. From macro-political events, they gradually extended to economic data, crypto industry events, and even sports events, making the application scenarios of prediction markets more diverse.

Finally, there was technological maturity. On-chain settlement, automated market making, and the application of AI tools in information analysis and trading assistance collectively lowered the barriers to participation and use.

The combined effect of these factors made 2025 the year prediction markets truly "broke into the mainstream."

V. Risks and Boundaries: A Rational View on Prediction Markets

It must be emphasized that prediction markets are not without controversy. The "pre-positioning" case mentioned at the beginning of the article also reflects that insider information, manipulation prevention, and compliance enforcement remain issues requiring continuous improvement in this field.

It also needs to be clearly stated that Mainland China explicitly prohibits related prediction and disguised gambling activities. Ordinary users should not participate in any activities that do not comply with local laws and regulations.

However, from a research and industry observation perspective, as a tool for information aggregation and probability expression, prediction markets still possess value worthy of attention and learning in terms of institutional design, technology, and product design.

For the Web3 industry, it provides a new direction: not merely revolving around "asset speculation," but building data infrastructure usable by real-world society around information, decision-making, and real-world events. This, perhaps, is the real reason prediction markets were widely discussed in 2025.