Record Trading Volume on Prediction Markets in October

Despite controversy, the prediction markets sector reached a record trading volume in October. Operators' average daily trading volume rose to $4.13 billion. According to Dan Fannon, a manager at Jeffries and Company, this figure represents a 55% increase over the previous month.

Sports event contracts accounted for $3 billion of daily volume, or 78%. Non-sports trades also rose 55% to an average of $843 million per day. Shay Boloor, Chief Market Strategist at Futurum Equities, said the election period played a major role in this increase. According to Boloor, Kalshi saw a total of about $2.6 billion in midterm election trades on election night.

Open interest reached $3.27 billion in October. This figure is 45% higher than in September and a record level. Open interest refers to the total value of active contracts that have not yet been settled. Polymarket's average daily volume rose 50% to $655 million. This is 395% higher than the same month last year. The total daily volume of other platforms was $309 million. These platforms hold a market share of roughly 7%.

Sports is the main driver of growth. With the start of the football, basketball and hockey seasons, open interest in sports contracts rose 83% in October. In September, the increase had been 73%. State regulators and some federal officials argue that event contracts violate state gambling laws, and they are trying to regulate operators.

New York Attorney General Letitia James claims that Kalshi's "combo" products actually work like parlay bets. According to James, the company secretly takes positions in the contracts. If this is true, the company's defense that it is merely an exchange offering peer-to-peer trading would be weakened. The allegation appears in court filings in the state's lawsuit against the company. Gaming lawyer Daniel Wallach shared the NY AG's claim on X. According to it, for 100% of Kalshi's combo bets, the counterparty is a market maker linked to or approved by Kalshi. Some parts of the sector deny that this trading structure actually exists.

Kalshi and other prediction markets argue that their products differ from traditional sports betting. These companies state that their trading is regulated only at the federal level by the Commodity Futures Trading Commission.