Prediction markets – Retail investors have a new ‘toy’ for speculation
In this photo illustration, applications for online prediction market sites are shown on an electronic device on February 25, 2026 in Chicago, Illinois.
Scott Olson | Getty Images
Barclays analysts noted that prediction markets have become “the shiny new toy of the retail industry” and noted the increasing popularity of prediction markets compared to other speculative investments.
Prediction platforms’ monthly notional volume has soared since the 2024 presidential election, along with a growth spurt last fall, analysts said in a report published Tuesday.
They said prediction markets are close competitors to leveraged exchange-traded products, which are high-risk investments that use debt and derivatives to multiply returns based on the daily performance of specific assets.
As of this year, the monthly notional volume of prediction markets is not far behind exchange-traded leveraged products and is comparable to index and single-stock call overwriting strategies, which often use call selling to generate returns.
Retail participation in derivatives markets has increased in recent years, analysts said. These investors make up the majority of those participating in zero-day options to maturity, or 0DTE options, on the S&P 500, which are responsible for more than half of total S&P options volume.
Speculative impulses often lead retail participants into once uncharted territory. Five years ago, retail investors fueled the rise of meme stocks. GameStop and other speculative names brought crypto into the mainstream. 0DTE options volume increases in early 2023 and beyond Cboe Global Markets launched the option S&P 500 Index.
Jeff Kilburg, founder, CEO and CIO of boutique asset management firm KKM Financial, said prediction markets have come to the fore because they are now accessible, citing the platform’s binary outcomes and “broad diversification” of events to trade as examples of why they may be more approachable.
“It’s a completely different animal,” he said.
The total notional volume of leading prediction market platforms Kalshi and Polymarket stood at over $24 billion as of April, up from less than $5 billion a year ago, according to data from Dune Analytics.
Barclays analysts noted that the majority of volume was focused on non-economic outcomes, with sports contracts making up the majority at both Kalshi and Polymarket.
Despite this rapid growth, prediction markets cannot compete with S&P’s flagship retail products such as ODTE options, Barclays analysts said. They said the total value traded on the S&P 0DTE market was approximately $57 trillion in March.
Kilburg doesn’t see the AI bubble driving increased interest in prediction markets. Instead, he argues that prediction markets have reached this milestone due to their viral appeal among younger generations.
A. Northwestern Mutual study As of earlier this year, almost a third of Gen Zers and almost a quarter of Millennials are currently putting money into or considering participating in prediction markets or sports betting.
Prediction markets can be a “bridge” to equity markets, Kilburg said. He expects investors to use this as a primer to get to grips with “extraordinarily accessible” platforms before resorting to high-risk zero-day options.
“It excites me,” he said. “The more people in the market, the better. There is no age discrimination in the beauty of the markets.”
Disclosure: CNBC and Kalshi have a business relationship that includes customer acquisition and minority investment.
