What Firms Should Consider Entering Prediction Markets

In the summer of 2026, the FIFA World Cup will be one of the most watched events in the world. It will also be one of the most visible moments yet for prediction markets.  

Once niche, these markets are scaling rapidly across sports, political, and economic events, drawing both retail and institutional attention along the way. Monthly trading volume surged from under $100 million in early 2024 to more than $20 billion in 2026, with recent months reaching approximately $22-23 billion across major platforms according to reporting from Dune Analytics.

For market operators, broker dealers, and other trading firms evaluating entry, the opportunity is clear. Early participation offers the chance to shape market structure, capture client demand, and establish a durable competitive position in a fast-growing segment — provided firms enter with governance, monitoring, and risk controls capable of withstanding scrutiny. As participation expands, firms are finding that entry into prediction markets also fundamentally changes what they are expected to understand and explain about trading activity.

This reflects a defining feature of prediction markets: these event-driven contracts are inherently visible. Event outcomes are public, and trading activity can be replayed once resolution occurs. Questions about timing, concentration, and information context can surface quickly, often before firms have fully contextualized the activity. In this environment, oversight expectations are forming in real time rather than after standards are finalized. 

This expansion is unfolding while the regulatory landscape remains unsettled. The Commodity Futures Trading Commission (CFTC) asserts federal oversight over event contracts structured as derivatives, even as certain state regulators continue to raise questions rooted in gambling law. Jurisdiction is still debated as participation accelerates, and firms cannot wait for a clean resolution before making decisions about how to structure participation.

In prediction markets, scrutiny does not wait.

The Market Is Scaling Before Standards Fully Settle

Prediction markets are moving from experimental platforms toward broader institutional participation. Entry is increasingly occurring through regulated pathways, acquisitions, and partnerships. Venues such as Kalshi and Polymarket are now discussed alongside traditional financial markets.

Participation spans operators building markets, infrastructure providers managing data and controls, clearing firms facilitating access, broker-dealers evaluating distribution, and trading firms positioning around event-driven contracts. Compliance, risk, and legal leaders are increasingly involved early in participation decisions rather than after trading scales. As a result, firms are confronting new demands around monitoring, data visibility, and post-event explainability that were less critical at smaller scale. These pressures are surfacing in different ways depending on where firms sit in the market lifecycle.

For clearing firms, participation brings operational responsibility as well as opportunity.

“As participation in prediction markets grows and new types of clients enter these markets, our focus remains on providing reliable access and strong risk management — while ensuring our monitoring, controls, and infrastructure scale alongside activity,” said Matt Lisle, SVP, Futures Chief Compliance Officer at Wedbush. “Our multi-asset clearing platform and global capabilities position us to support this at institutional scale, and we see our role as helping firms and participants enter these markets with the technology and operational excellence needed to operate confidently as new structures emerge.”

Firms entering today are navigating rapid scaling in high-visibility markets, early public and regulatory attention, and limited clarity about how supervisory expectations will ultimately evolve. The absence of fully settled rules does not diminish opportunity. It amplifies risk. It raises the stakes for entering with monitoring, data visibility, and governance capabilities before standards are fully defined.

That dynamic is rooted in how these markets function.

Event-Driven Market Dynamics

Prediction contracts resolve at fixed points tied to real-world events. Liquidity converges toward a limited set of outcomes. Their lifecycle is finite. These structural features compress decision making windows and increase the importance of understanding trading behavior in context.

Unlike markets defined by continuous price discovery, these contracts function more like short-lived exposures tied to specific outcomes. As resolution approaches, activity often intensifies. Positions can accumulate in compressed windows. Oversight teams have less time to identify, assess, and respond to emerging risk. Concentration may build rapidly relative to historical norms.

Consider a hypothetical World Cup semifinal in which Brazil is favored to advance. In the hours before kickoff, trading accelerates sharply around a Brazil win, with exposure building quickly in a narrow window. Once the match concludes, the trading record becomes fixed and publicly replayable. Review shifts from monitoring price movement to explaining why concentration formed when it did.

“Traditional surveillance tells you that something happened,” said Melissa Watras, Director of Product at Trillium Surveyor. “In event-driven markets, teams must be prepared to explain why it happened once the outcome is known.”

Increasingly, oversight questions are framed less as whether a trade was permitted and more as whether it can be clearly explained. In event-driven markets, that distinction is consequential.

Oversight teams are being asked to reconstruct when exposure accumulated, how quickly concentration formed, whether activity aligned with publicly available information, and how behavior compared with historical participant patterns. The focus shifts from detection alone to defensible, evidence backed explanation.

How Familiar Manipulation Tactics Surface

The risks themselves are not new. Wash trading, spoofing, position concentration, and information advantage are familiar from traditional markets. What changes in prediction markets is how and when those tactics surface. Event-driven pricing, fixed resolution points, and thin liquidity can amplify behavior that might otherwise be less visible.

In compressed event windows, patterns that might unfold gradually in traditional markets can emerge quickly. Concentration may form sharply relative to a trader’s historical behavior. Thin liquidity near resolution can magnify price movements and heighten visibility.

Some early activity in prediction markets has demonstrated how spoofing-style behavior can appear in event-driven settings, including instances where large resting orders were placed in ways that appeared to influence sentiment before being withdrawn. Even absent formal enforcement findings, such patterns illustrate how traditional tactics can translate into highly visible event-driven environments.

“One thing that surprises teams most is how quickly concentration forms relative to prior behavior,” said Damon Grandbouche, Manager of Technical Accounts at Trillium Surveyor. “It is not only size. It is the speed of accumulation, proximity to the event, and how that pattern compares to past activity. These dynamics require monitoring approaches that consider trade size in context with timing and participant behavior.”

The visibility of event-driven markets also creates material perception risk.

In event-driven markets, reputational narratives can form quickly. Consider a hypothetical high-profile political race in which a small number of accounts build meaningful exposure in the final hours before polls close. Even when the information relied upon is public, the timing and precision of those trades can appear unusually striking in hindsight, particularly when viewed against broader participant activity.

What Early Entrants Are Learning

Firms already active in prediction markets are finding that oversight conversations can begin early and escalate quickly.

Event-driven trading compresses review timelines and escalation windows, leaving less time to detect and contextualize unusual behavior. Many of today’s surveillance and analytics tools designed for continuous markets do not automatically account for finite contract lifecycles and concentrated exposure patterns, which require a different analytical lens.

Event-driven markets also increase visibility across the trading ecosystem. Market operators must demonstrate the integrity of the venue, while brokers, clearing firms, and trading participants must explain the activity they facilitate.

For firms already operating in these markets, that visibility is shaping how controls and governance are defined early.

“Compliance is in our DNA, and that foundation remains just as critical as we expand into prediction markets,” said Jeanine Hightower-Sellitto, Senior Vice President and GM of DraftKings Predictions. “These products sit at the intersection of innovation and regulation, and one of the key lessons is that controls need to be defined early. Once activity builds around major events, the window to make adjustments narrows, so operating responsibly requires having the right framework in place before participation scales.”

Event-driven contracts also rarely operate in isolation. Activity around major sporting events, political races, or economic announcements can coincide with reactions across related markets, increasing visibility and accelerating scrutiny.

At the same time, the data and infrastructure supporting these markets are still evolving.

“From an infrastructure perspective, prediction markets introduce both familiar and new dynamics,” said Eric Duncan, Head of Business Development at Databento. “On one hand, prediction markets function much like binary options, so there’s little reason to expect them to differ fundamentally from traditional. On the other hand, their infrastructure – particularly around connectivity, market resolution, dispute handling – is still nascent and structurally distinct, which could pose challenges for trading firms accustomed to more mature, well-tested environments.”

That tension is shaping how firms are approaching participation.

“As with any emerging asset class, firms must assess whether they possess a sustainable competitive advantage, whether market liquidity and capacity can support their strategies, and whether regulatory or compliance risks are manageable,” Duncan added. “Compared with traditional markets, prediction markets often lack mature regulatory safeguards against informed trading. Greater participant anonymity and the potential for insiders to influence outcomes or resolution processes may undermine a firm’s informational edge and complicate risk management.”

Data complexity adds another layer. Market feeds may vary in structure and completeness, and event definitions can differ across venues. Systems must be able to reconstruct context across time, participants, and related markets to support credible post-event explanation.

These dynamics are unfolding alongside broader market structure changes. As trading hours expand and firms adjust routing and execution strategies, event-driven activity can move across venues more quickly, increasing oversight complexity.

Because many firms rely on third-party data feeds and external vendors, questions about data integrity and lineage can surface quickly. Vendor relationships that might receive limited attention in other markets can become central when outcomes are binary and highly visible.

Preparation increasingly centers on monitoring trade size and concentration in context while aligning surveillance with predictable event milestones and coordinating governance, legal, and compliance functions are coordinated before participation scales.

Oversight is no longer a downstream consideration. It has become a prerequisite for entry.

What Deliberate Participation Looks Like

Firms approaching prediction markets deliberately are taking steps before volume peaks, building oversight and governance frameworks early and allowing controls to evolve as participation grows.

They are defining governance ownership, clarifying escalation paths for high-profile events, and establishing guardrails around politically or economically consequential contracts. This includes aligning compliance, legal, and risk teams on who makes decisions, how sensitive activity is reviewed, and how behavior will be explained if questions arise. Controls are designed to be proportionate to the structure and lifecycle of these products, recognizing that event-driven contracts naturally concentrate risk and activity around defined moments

Operational preparation is equally important. Firms are establishing visibility into trade timing, concentration, and participant behavior from day one, and preparing to reconstruct activity once an event resolves. Monitoring is designed to keep pace with event timelines and account for how related markets may react to the same development.

They are also asking direct questions. Can we explain why behavior changed, not just that it did? Do we have cross-market visibility when related instruments react simultaneously? Could we defend our approach publicly if activity becomes headline news?

The objective is not to eliminate volatility, but to build the internal capability to participate confidently — to scale exposure, serve clients, and capture opportunity without being reactive when scrutiny arises.

Looking Ahead

Prediction markets now combine rapid scaling, retail-driven momentum, growing institutional participation, real-world catalysts across sports, political, and economic events, high visibility, and evolving regulation. Together, these forces create both extraordinary opportunity and heightened structural complexity.

Firms that approach entry deliberately — aligning governance, surveillance, and explainability with the structure of event-driven markets — will be positioned not only to manage risk, but to participate confidently as these markets mature.

As market structure continues to evolve, oversight will increasingly depend on systems that provide visibility into trading behavior, context around event timing, and the ability to reconstruct activity with confidence. For many firms, this means working with technology partners that understand the operational realities of event-driven markets and can help adapt oversight as participation grows.

In event-driven markets, the firms best positioned to realize opportunity will be those that build oversight capability at the same pace as participation.

About Trillium Surveyor

Trillium Surveyor delivers powerful, intuitive trade surveillance and best execution analytics designed to help firms monitor evolving markets, including prediction markets. Learn more at https://trilliumsurveyor.com/.