Prediction markets are having a moment. Those tracking the space have watched the acceleration firsthand, but Super Bowl Sunday marked its arrival into the mainstream. If you weren’t aware of what was happening prior to Super Bowl Sunday you almost certainly are now. With more than $1.3B in cumulative volume traded on the Super Bowl alone, prediction markets have crossed the chasm into cultural relevancy.

Despite the hype created this past Sunday, this is not about a single event, court case, or even a short-term regulatory arbitrage. It is about the first time we are seeing three forces converge at scale: meaningful consumer adoption, real liquidity, and a regulatory framework that, while still contested, is beginning to take shape.

When that convergence happens, categories stop being theoretical and start becoming investable.

This perspective was shaped through work we’ve been doing at Drive including a recent discussion we led in December exploring the regulatory complexities and investment potential at the center of prediction markets. I was joined by Andrew Kim, one of the most experienced legal advisors working at the intersection of derivatives regulation and prediction markets, and Jon Von Deylen, a partner at Drive who leads our thematic work in the space.

What follows reflects how we are thinking about this category as a firm: what we believe matters, where the opportunity is real, and how we are approaching it as investors.

What a Prediction Market Actually Is (and Why That Matters)

At their core, prediction markets allow participants to express belief through tradable contracts tied to real-world events. Most modern prediction markets use binary event contracts that resolve to “yes” or “no,” with prices reflecting the collective probability assigned by market participants.

That framing sounds simple, but the structure is important.

Unlike traditional betting, prediction markets are not priced by a centralized operator. Prices move based on supply and demand, and participants can trade in and out of positions as information changes. In practice, this makes prediction markets behave much more like financial markets than sportsbooks, even when they cover similar events.

This distinction sits at the heart of nearly every regulatory, economic, and investment question in the category.

Why Adoption Is Accelerating Now

Several factors are driving adoption, but three stand out most clearly to us:

Access. Prediction markets are available in far more jurisdictions than regulated sports betting, unlocking demand in places where sportsbooks remain unavailable.

Breadth. While sports account for the majority of volume today, prediction markets naturally extend into politics, culture, finance, crypto, and news-driven events. These are markets that are difficult for centralized operators to underwrite, but well-suited to distributed risk and collective forecasting.

Product design. Prediction markets operate continuously, react instantly to new information, and present probabilities in a more intuitive format than traditional odds. For many users, markets themselves become a signal - a real-time, market-driven source of information that is useful even without active participation.

This is less about novelty and more about utility.

Regulation: Friction, Not Fragility

In the United States, prediction markets operate through event contracts regulated by the Commodity Futures Trading Commission. Most contracts are brought to market through a self-certification process, with the CFTC retaining authority to review certain categories.

The tension today lies at the boundary between federally regulated derivatives and state-regulated gambling, particularly as sports-related markets have scaled. That tension has produced litigation and uncertainty, but we view this as a natural consequence of relevance, not a sign of structural weakness.

Categories do not face regulatory pressure until they matter. What we are seeing now is a system adjusting to scale.

How this resolves will shape whether prediction markets remain a parallel system or evolve into a national, federally regulated alternative to state-by-state sports betting. Either way, the direction of travel is clear.

How Big Can This Get?

Prediction markets are still early, but growth has been dramatic. Weekly trading volumes across leading platforms now regularly reach into the billions, with annualized run-rate volume approaching $150B.

Today, sports dominate that volume. But sports are not the end state.

The global sports betting market generates roughly $1T in annual handle after decades of consumer awareness and regulatory expansion. Non-sports markets - including politics, macroeconomic outcomes, financial events, and culture - are far earlier in their lifecycle and far broader in scope.

If prediction markets expand meaningfully beyond sports, it is reasonable to imagine trillions of dollars in annual trading volume over time. Importantly, this ecosystem is also structurally high margin relative to traditional betting, with fewer tax and operating burdens at the infrastructure level.

Scale is not the hard part to imagine. Structure is.

Where We See the Investable Opportunities

This is the question we hear most often from LPs, and rightly so.

We do not believe prediction markets are a simple winner-take-all platform story. Unlike traditional sports betting, value in this ecosystem is not concentrated in a single operator. Instead, meaningful value accrues at several distinct points in the value chain, creating room for specialized, capital-efficient businesses. Based on our work in the space, three areas stand out.

Consumer front ends. Prediction markets allow multiple consumer-facing products to tap into shared liquidity rather than owning risk themselves. This lowers barriers to entry and creates room for differentiated experiences built around specific users, verticals, or behaviors. We expect a diverse ecosystem of front ends rather than a single dominant interface.

Market-making and trading infrastructure. Market making in prediction markets involves underwriting risk, but success is determined by speed of execution and pricing aggressiveness, as market makers must competitively bid for every unit of order flow rather than manage exposure over time.

Data and analytics. If prediction markets scale into trillions of dollars in volume, data becomes foundational infrastructure. While sports data is relatively mature and well-understood, data around non-sports outcomes remains fragmented, unstructured, and largely unsolved. Companies that can source, structure, and analyze information around political, economic, and cultural outcomes will become essential to the ecosystem.

A Closing Thought

Prediction markets are no longer a thought experiment. They are forming into a real category at the intersection of markets, media, and entertainment.

As infrastructure compounds and regulatory clarity improves, these markets have the potential to reshape how people express belief, interpret information, and interact with uncertainty itself.

For founders building in this space, we are actively looking to partner with teams who understand not just what is possible, but where value actually accrues. Please reach out to any member of our team or contact us at info@drivebydraftkings.com. We would love to learn more about what you are building.