History of Prediction Markets: 1988 to 2026

In 1988, a handful of University of Iowa economists set up a small futures market to see if traders could forecast a presidential election better than Gallup. Nearly four decades later, Polymarket and Kalshi run hundreds of millions of dollars through markets on everything from Fed rate decisions to the 2026 midterms. The history of prediction markets is short, but it's been anything but linear — one shutdown, one 13-year gap in credible US options, and a regulatory fight that's still playing out in court this year.

1988: the Iowa Electronic Markets prove the concept

The Iowa Electronic Markets (IEM) launched in 1988 as a real-money academic exchange where traders bought and sold contracts tied to election outcomes. It's the first modern prediction market and it's still running today, operating under a CFTC no-action framework rather than as a licensed exchange. The research payoff was immediate and durable: economists Berg, Nelson, and Rietz found that IEM prices beat 964 traditional opinion polls 74% of the time across five US presidential elections between 1988 and 2004. That paper — "Prediction market accuracy in the long run" — became the founding evidence that markets aggregate information better than surveys.

2001–2013: Intrade becomes the default, then disappears

Intrade, based in Ireland, launched in 2001 and spent the next decade as the go-to venue for political and current-events betting outside the IEM's academic walls. It had real depth, real media coverage — pundits cited Intrade odds on air during the 2008 and 2012 US elections — and no serious domestic competitor. Then in 2013 it shut down abruptly amid financial irregularities and regulatory pressure, including a CFTC civil complaint over US customer access. For the next year, there was no liquid, mainstream prediction market left standing.

2014: PredictIt fills the gap under a narrow mandate

PredictIt launched in 2014, run by Victoria University of Wellington in New Zealand under a CFTC no-action letter — the same regulatory posture as the IEM, not a full exchange license. It restricted itself to political-event contracts and academic research, keeping position caps low (originally $850 per contract, capped at 5,000 traders per market) to stay inside the no-action boundaries. That narrow scope kept PredictIt alive but also kept its liquidity thin next to what would come later. Litigation over PredictIt's status ran for years and only resolved in July 2025, producing an amended no-action letter under new academic management. The per-contract cap is now tied to the federal campaign-contribution limit, raising it to up to $3,500 per position, and the old 5,000-trader-per-contract ceiling was removed. Fees remain 10% on gross profits plus a 5% withdrawal fee.

2020: two very different models launch in the same year

2020 is the hinge point in this history. Kalshi received its CFTC Order of Designation on November 4, 2020, becoming the first federally regulated US prediction market — a Designated Contract Market (DCM) with a clearinghouse, KalshiEX LLC paired with Kalshi Klear LLC, holding customer funds under standard commodities-market rules. Event contracts trade $0.01–$0.99, one YES and one NO always summing to $1.

Polymarket launched the same year on the opposite model: a peer-to-peer exchange built on Polygon, settled in USDC, with no US regulatory license at launch. Its Central Limit Order Book matches orders off-chain and settles on-chain through the Conditional Token Framework (an ERC-1155 standard), and markets resolve through the UMA Optimistic Oracle rather than an internal Kalshi-style resolution desk. Two philosophies — regulated-and-restricted versus permissionless-and-offshore — set up the next five years of divergence.

2024: the election cycle that changed the scale

The 2024 US presidential election cycle drove Polymarket to record trading volume and pulled prediction markets into mainstream financial and political media for the first time since Intrade's peak. That volume proved the demand was real, not a crypto-niche curiosity, and it set both Polymarket and Kalshi up to pursue the next phase: getting Polymarket's crypto-native platform inside the US regulatory perimeter.

2025: Polymarket buys its way into US compliance

Polymarket acquired QCEX, a CFTC-licensed Designated Contract Market and clearinghouse, in July 2025 for roughly $112 million. That same month, a 2022 CFTC enforcement probe into Polymarket was dropped. In November 2025, Polymarket received an Amended Order of Designation from the CFTC, letting it operate an intermediated, federally regulated US exchange through the QCEX entity. The regulated US product went live to American users on December 2, 2025. Crucially, Polymarket's original international exchange stayed geoblocked to US users — the QCEX-based US product and the offshore exchange are separate rails under separate rules. For the full regulatory picture, see our breakdown of prediction market regulation and is Polymarket legal in the US.

2026: courtroom wins, a new probe, and the midterms

2026 has been a year of consolidation and friction in roughly equal measure. Polymarket dropped its iOS waitlist in May 2026, putting the regulated US exchange fully live on iPhone. It also filed with the CFTC on April 28, 2026 seeking permission to let US users trade the main offshore exchange directly — a request still pending as of this writing. On the enforcement side, a new CFTC probe into Polymarket opened in June 2026, even as the earlier 2022 case stayed closed.

Kalshi had its own milestone: in May 2026, the Third Circuit Court of Appeals ruled that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over sports event contracts listed on CFTC-licensed DCMs, preempting New Jersey's state gambling law. That decision didn't end state-level friction everywhere — Minnesota's ban on prediction market trading takes effect August 1, 2026, and Connecticut, Arizona, and Illinois remain contested — but it gave Kalshi a strong federal-preemption precedent for future fights. See our full is Kalshi safe rundown for the state-by-state detail.

Now both platforms are running head-first into the biggest event on the 2026 calendar: the November 3, 2026 midterms, with over 500 active markets already listed across Kalshi and Polymarket by June.

Timeline at a glance

Year	Event
1988	Iowa Electronic Markets launch — first modern academic prediction market
2001–2013	Intrade dominates political forecasting, closes in 2013
2014	PredictIt launches under a CFTC no-action framework
2020	Kalshi becomes first CFTC-regulated DCM (Nov 4); Polymarket launches on Polygon
2024	Polymarket's US election cycle drives record volume
2025	Polymarket acquires QCEX, wins Amended Order of Designation, relaunches to US users Dec 2
2026	Kalshi wins Third Circuit sports-jurisdiction case; Polymarket US iOS live; 2026 midterms approach

What's striking looking back is how much of this history is regulatory, not technological. The order-book mechanics of a Kalshi contract or a Polymarket CLOB aren't radically different from what Intrade ran in 2005. What changed is who's allowed to offer it to whom, at what size, under whose jurisdiction — and that fight is still live. Anyone trading these markets today is trading inside a framework that's less than a year old in its current form, which is exactly why understanding how accurate prediction markets actually are matters as much as understanding the mechanics. If you're new to the space, our what are prediction markets primer covers the mechanics this history built on top of.

FAQ

What was the first prediction market?

The Iowa Electronic Markets (IEM), launched in 1988 by the University of Iowa, is the first modern academic prediction market. It still operates today under a CFTC no-action framework and beat 964 traditional polls 74% of the time across five US presidential elections from 1988 to 2004, according to research by Berg, Nelson, and Rietz.

What happened to Intrade?

Intrade, an Ireland-based prediction market, operated from 2001 to 2013 and became the dominant political forecasting platform of its era before shutting down in 2013 amid regulatory and financial trouble.

When did Kalshi and Polymarket launch?

Both launched in 2020. Kalshi received its CFTC Order of Designation as a regulated Designated Contract Market on November 4, 2020, making it the first federally regulated US prediction market. Polymarket launched the same year as a crypto-settled exchange on Polygon.

Is Polymarket legal in the US now?

Polymarket acquired the CFTC-licensed exchange QCEX in July 2025 for roughly $112 million, received an Amended Order of Designation from the CFTC in November 2025, and relaunched to US users on December 2, 2025 through that regulated entity. Its original offshore exchange remains geoblocked to US users as of mid-2026.

What drove prediction market growth in 2024 and 2025?

The 2024 US presidential election cycle pushed Polymarket to record trading volume and mainstream attention. That momentum carried into 2025 as Polymarket pursued US regulatory approval and Kalshi expanded into sports event contracts, setting up both platforms for the 2026 midterms.

This article is for educational purposes only and is not financial advice. Trading involves risk of loss.