Bank of America report: Kalshi controls 89% of prediction markets, regulatory advantage leads the competition

According to Bank of America’s latest report, the U.S. prediction market’s total trading volume this week rose 4% month over month. Among this, the exchange Kalshi—regulated by the U.S. Commodity Futures Trading Commission (CFTC)—saw a 6% increase. Kalshi currently controls about 89% of the U.S. prediction market’s trading volume. At the same time, Polymarket, a crypto-native platform, saw its week-over-week trading volume drop by 16%, with its share falling to 7%.

Why Kalshi Holds an 89% Share: Regulatory Status as a Competitive Moat

Kalshi operates under the CFTC regulatory framework, categorizing its contracts (covering the results of political and sports events) as financial derivatives rather than gambling products. This classification gives Kalshi a clear position from a compliance standpoint, attracting both institutions and retail users that prefer regulated platforms.

By contrast, Polymarket operates based on blockchain technology and has historically operated outside the U.S. regulatory framework. It allows users to trade event outcomes using cryptocurrencies, which can attract global liquidity but continues to face ongoing compliance constraints within the U.S. The 16% week-over-week decline in Polymarket trading volume shown in the Bank of America report directly reflects the real impact of this regulatory asymmetry on market share.

CFTC’s Federal Framework vs. Each State’s Gambling Regulations

The core legal dispute for prediction markets lies in how they are fundamentally characterized: are they financial instruments or gambling products. The CFTC has taken an active stance by filing lawsuits against multiple states, arguing that federal law takes precedence over state-level gambling regulations. It also clearly distinguishes “sports betting” (classified as entertainment) from “event contracts” (classified as financial instruments used for risk hedging).

Main States’ Current Legal Status Toward Kalshi

Nevada: Has obtained a state-level preliminary injunction against Kalshi

Massachusetts: Has obtained a state-level preliminary injunction against Kalshi

New Jersey: The appeal was denied, limiting its ability to enforce gambling laws against Kalshi

CFTC’s Federal Position: Continued Litigation Supporting Kalshi, Asserting the Federal Framework Supersedes State Law

The outcome of this legal fight between the federal government and the states will determine the direction of the entire industry. If the federal government wins, Kalshi can expand nationwide under a unified framework. If it loses, it may be forced to adopt a similar state-by-state operating model to online sports betting, significantly increasing compliance costs.

Competitive Landscape Reshuffles: Traditional Players Exit, Major Exchanges Accelerate get on board

The Bank of America report also notes that FanDuel recently closed part of its fantasy sports operations. The report believes this move was partly driven by the rise of prediction markets—users are shifting from traditional gambling-style products toward prediction market formats with more trading characteristics.

At the same time, major exchanges are accelerating their plans. Coinbase (COIN) and Crypto.com are exploring prediction market-type products; on Thursday, Binance (Binance) announced the addition of prediction market functionality in its Binance Wallet. This wave of institutional get on board signals that prediction markets are rapidly transforming from a fringe crypto track into a mainstream financial product category.

FAQ

What Is Kalshi, and What Are the Fundamental Differences vs. Polymarket?

Kalshi is a prediction market exchange that is federally regulated by the CFTC. It classifies event outcome contracts as financial derivatives, giving it a clear U.S. compliance status. Polymarket is blockchain-based, allowing global users to trade event outcomes using cryptocurrencies. It has historically operated outside the U.S. regulatory framework and faces higher compliance risk domestically.

How Will the Legal Conflict Between the CFTC and the States Ultimately Be Ruled?

The litigation is still ongoing, and there is no final ruling yet. If the courts support the federal priority principle, platforms regulated by the CFTC such as Kalshi could freely expand under a unified framework across the U.S. If the states’ claims are supported, prediction markets would be forced into a fragmented model of applying for licenses state by state, similar to the current landscape of online sports betting.

What Impact Will Binance and Coinbase’s Prediction Market moves have on Kalshi?

In the short term, major exchanges entering the market could bring more users and liquidity to the overall prediction market. But in the long term, Binance and Coinbase have clear advantages in terms of user base and brand recognition, which could create competitive pressure on Kalshi’s market leadership—especially in market segments where regulatory classification has not yet been firmly established.