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Prediction markets sprint from crypto niche to mainstream finance

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Crypto VC Funding Reaches $244M as Mesh Leads

Prediction markets like Polymarket and Kalshi now clear nearly $24b a month as AI bots, Wall Street capital and new CFTC rules drag the sector into mainstream finance.

Summary

  • Prediction markets led by Polymarket and Kalshi have exploded from a niche crypto product into one of finance’s hottest sectors in under a year.
  • Platforms now span DeFi-native venues, fully regulated exchanges, AI-powered tools and sports-focused apps, with cumulative monthly volumes in the tens of billions of dollars.
  • Regulators and Wall Street players are circling the space, with the White House reviewing new CFTC rules as investors treat prediction odds as a new kind of market data.

Prediction markets are moving from the fringes of crypto into the core of global finance, with X account Top 7 Crypto | Analytics & Alpha arguing they have become “one of the hottest sectors in finance in under 12 months” thanks to platforms such as Polymarket and Kalshi. In a post that has drawn nearly 50,000 views, the account describes an expanding “Prediction Markets Landscape” that now includes “DeFi natives, regulated exchanges, AI-powered and sports-focused platforms,” and urges followers to “Save the list before your feed buries it,” underscoring how fast new venues are appearing. 

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That momentum reflects a sector-wide surge: industry research cited by Hashgraph Ventures notes that prediction market volumes nearly quintupled from early 2025, while a16z has flagged the space as a breakout category after the 2024 U.S. election cycle.

A detailed report from TRM Labs found that prediction market transactions hit 191 million in March, with trading volume reaching about $23.9 billion, a 2,800% jump from the prior year as geopolitical and macroeconomic bets dominated flows. Crypto.news has separately reported that, for the week ending March 9, nominal volume on Polymarket hit $2.49 billion, while CFTC-regulated Kalshi posted $2.85 billion, pushing total sector volume to $14.5 billion and lifting unique users to 2.8 million. Phemex analysis suggests that for full-year 2025, combined volumes on Polymarket and Kalshi approached $40 billion, helping turn both into multibillion‑dollar companies. On both platforms, ultra‑short‑term contracts now drive activity: according to a recent crypto.news story, five‑ to 15‑minute “up‑down” contracts on BTC, ETH and other coins already account for more than half of their crypto trading, with combined daily volume around $70 million.

Top 7 Crypto’s thread, based on a landscape graphic from analytics firm @surgence_io, highlights how broad the category has become, drawing in replies from projects spanning on-chain metrics, AI assistants and sports betting. Hedgehog, a data platform that focuses on gas fees and funding rates, wrote that “the prediction market landscape is expanding fast” and said it is “focused on the layer underneath everything else: on-chain metrics… The costs that power every transaction on every chain.” Other builders chimed in to stress the AI and tooling angle: “We are also AI powered tools for prediction market,” wrote @Bobbxu, pointing to @questflow as a way to automate analysis and execution around event contracts. Sports-focused accounts including Trajan Capital and Overtime.io protested being left off the initial list, with Trajan saying that excluding @BetOpenly, @4CxSweeps and @PlayProphetX was “like listing car makes and skipping BMW, Mercedes and Porsche.”

Behind that noisy expansion sits a clearer split between permissionless and regulated rails. Polymarket, built on crypto infrastructure, has leaned into global access while facing mounting pressure from regulators, including a recent crypto.news story on its ban in Argentina after a gambling probe and an earlier lawsuit against Massachusetts over state-level restrictions. Kalshi, by contrast, stresses its status as a CFTC‑regulated Designated Contract Market, explaining in its Market Integrity Hub that all of its event contracts are subject to the Commodity Exchange Act and “23 Core Principles” that govern futures exchanges. That regulatory positioning has attracted both enforcement attention and institutional interest: a crypto.news report noted that ARK Invest is now using Kalshi data “to track market expectations” and integrate market‑implied probabilities into research and risk management.

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The capital entering the space looks increasingly like traditional finance. According to Bloomberg, Intercontinental Exchange, owner of the New York Stock Exchange, plans to invest up to $2 billion in Polymarket, valuing the platform at roughly $8 billion and signalling that big exchanges see event contracts as a strategic product line. A separate Bloomberg report on a 2025 fintech funding rebound noted that Polymarket and Kalshi together raised about $3.71 billion in fresh capital that year, helping push global fintech funding to $55.94 billion, up 25% from 2024. A follow‑up piece cited by crypto outlets added that Polymarket is negotiating new funding at a valuation between $12 billion and $15 billion, while Kalshi’s valuation has climbed above $10 billion, underlining how quickly markets now value their flows.

Policymakers are responding. The U.S. Commodity Futures Trading Commission recently issued new guidance and enforcement advisories on prediction markets, reminding platforms that it retains “full authority to police illegal trading practices” on Designated Contract Markets. The White House is currently reviewing a fresh set of CFTC measures that would clarify the status of event-linked derivatives, a step crypto.news says could shape how platforms structure contracts on elections, macro data and geopolitics far beyond the crypto niche. In parallel, a Financial Times feature titled “Prediction markets: the hunt for the new ‘dumb money’” chronicles how retail traders are flocking into markets where odds on politicians, central banks and even pop culture become tradable data points, and notes one user who migrated from regulated Kalshi to offshore Polymarket to chase higher leverage.

Crypto-native firms are now treating this data as a new market primitive. A recent crypto.news story on Coinbase’s “everything exchange” strategy described how the company wants regulated prediction markets to sit alongside spot crypto and tokenized assets, with executives arguing that odds from venues such as Polymarket and Kalshi can compete with polling, sell‑side research and even traditional media feeds. Another crypto.news story on “Prediction market activity jumps 2800%” tied the recent spike to geopolitical contracts, pointing out that broadcasters including CNBC and Dow Jones have begun integrating live odds into their coverage. With Top 7 Crypto promising an updated “Prediction Markets Landscape” to reflect the dozens of teams now vying for attention, the sector’s next phase will likely hinge on whether this flow of dollars, regulatory clarity and media exposure can turn what was once a degen side hobby into a durable piece of financial infrastructure.

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Every 5 Minutes: Korea’s New Rule for Crypto Exchanges

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South Korea’s financial regulator has ordered all crypto exchanges to verify user asset balances every five minutes, following a massive overpayment incident that shook market confidence earlier this year.

One botched reward payout exposed systemic cracks across the entire industry.

What Triggered the Rules

In February, Bithumb accidentally sent 2,000 BTC per person instead of 2,000 Korean won ($1.40) during a promotional event. The error amounted to roughly $42 billion in misallocated crypto. The Financial Services Commission (FSC) launched emergency inspections across all five major Korean exchanges immediately after. What they found went far beyond a single human mistake.

Most exchanges were only reconciling their books once every 24 hours. Three had no automatic kill switch to halt trading when discrepancies appeared. Four lacked multi-step approval systems for high-risk manual transactions. Two exchanges hadn’t even separated their general accounts from high-risk transaction accounts — a basic safeguard.

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What Exchanges Must Now Do

The FSC announced a three-pillar reform package on April 6. Exchanges must run automated balance checks every five minutes, with alerts and automatic trading halts triggered by major mismatches. Monthly external audits replace the previous quarterly schedule, and public disclosures must now include asset-by-asset blockchain holdings rather than a simple coverage ratio.

For manual, high-risk transactions such as event payouts, exchanges must use separate accounts, deploy validity-check systems that automatically reject mismatched inputs, and require cross-verification by a third party before execution.

The FSC will also require exchanges to appoint dedicated risk management officers and establish risk management committees — standards already expected of traditional financial firms. Compliance checks move from annual to twice-yearly, with results reported to regulators.

DAXA, the industry body, will complete self-regulatory amendments this month, with systems built out by May. Key provisions will feed into Korea’s forthcoming second-phase Digital Asset Act.

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The post Every 5 Minutes: Korea’s New Rule for Crypto Exchanges appeared first on BeInCrypto.

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Chaos Labs Leaves Aave Due to Budget, Risk Disagreements

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Chaos Labs Leaves Aave Due to Budget, Risk Disagreements

Chaos Labs has parted ways with the Aave ecosystem after serving as the crypto lending protocol’s main risk service provider for three years, citing a budget dispute and disagreements over how Aave should manage risk.

“This decision was not made in haste,” Chaos Labs founder Omer Goldberg said in a post to X on Monday. “We worked in good faith with DAO contributors. Aave Labs was professional and supported increasing our budget to $5m to retain us. However, we are leaving because the engagement no longer reflects how we believe risk should be managed.”

Source: Omer Goldberg

Aave Labs CEO Stani Kulechov said that Chaos didn’t depart on bad terms, but claimed that Chaos pitched a proposal seeking to become the sole risk provider and thus force out other partners — a compromise Aave wasn’t willing to accept.

Chaos played a key role in Aave’s back-end infrastructure, from pricing loans and managing risk in the Aave V2 and V3 markets since November 2022, during which Aave’s total value locked rose fivefold to $26 billion.

Risk has been a major talking point in the Aave community after a user lost $50 million in a trade while interacting with Aave’s interface on March 12. The following week, Aave said it would introduce an “Aave Shield” protection feature to deter users from high-risk trades.

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As for Chaos’ departure, Goldberg said there became an increasing misalignment over how the parties thought risk should be managed. He noted that some Aave contributors had left, raising its workload, while also arguing that Aave V4’s expanded functionality introduced additional operational and legal risks that fell on Chaos’ shoulders.

“While Aave Labs is optimistic about a swift migration to V4, history suggests these transitions take months and even years,” Goldberg said. “Until V4 fully absorbs V3’s markets and liquidity, both systems need to be operated and managed simultaneously. The workload during the transition doesn’t halve. It doubles.”

Weighing the risk of a protocol failure, Goldberg said, “There is no regulatory framework, no safe harbor, and no settled law that answers the question of what a risk manager or curator owes when a protocol fails. If things work, the work is invisible. If things break, the blame is not.”

As such, “We are walking away from a $5 million engagement,” Goldberg said.

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Chaos wanted Aave to boot LlamaRisk, Chainlink: Kulechov

Aave Labs CEO Stani Kulechov told a slightly different story, stating that Chaos wanted to be the sole risk manager and use its price oracles instead of Chainlink’s.

Following that request would have forced Aave to push out its other risk protocol partner, LlamaRisk, and thus abandon its two-layer economic risk model.

Related: DeFi lender Aave launches on OKX’s Ethereum L2, X Layer

Kulechov added Aave was unwilling to integrate Chaos-built price oracles, citing Aave’s “track record” with Chainlink’s services, which its “users are currently more comfortable with at scale.”

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He also said Chaos was already “exploring winding down its risk consultancy services,” and that Aave had offered to double its payment to $5 million to retain them.

Cointelegraph reached out to Chaos Labs for comment.

Kulechov noted that Chaos’ departure hasn’t disrupted the Aave protocol, its smart contracts, token listings or network integrations.

Moving forward, Aave said it “will work closely with LlamaRisk to ensure a smooth transition” and maintain its two-layer economic risk model. 

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Source: LlamaRisk

Chaos’ departure comes amid a protocol-wide feud over how much funding and revenue control Aave Labs should receive versus Aave’s decentralized autonomous organization.

Despite the internal issues, Aave crossed the $1 trillion mark in cumulative lending volume in late February, marking a first in the DeFi industry.

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