Trades on the Iowa Electronic Markets were capped at $500 per account. That limit tells you most of what you need to know about the first modern prediction market: it was built to produce research papers, not profit.
Economists at the University of Iowa’s business school launched it in 1988 to test a plain idea. A market full of traders risking real money, they figured, should forecast presidential elections better than polls do. Across several election cycles, its vote-share contracts beat national polling averages. The CFTC granted it a no-action letter that allowed small-stakes trading for academic purposes.
It never grew large, with only a few thousand dollars in contract value per election. But it showed that financial incentives, pooled, can outperform expert opinion and surveys. Every platform since rests on that finding.
Intrade removes the guardrails
Intrade, founded in Ireland in 2001, kept the idea and dropped the limits. There was no $500 cap and no academic oversight, and contracts covered everything from elections to the capture of Saddam Hussein to Oscar winners. By the 2008 and 2012 US presidential races it was handling tens of millions of dollars, and CNN and the Wall Street Journal cited it as a live probability tracker.
The CFTC sued in 2012, saying Intrade offered off-exchange commodity options to US residents without registering. Intrade shut out US customers in 2013. In early 2014 it collapsed after auditors found a shortfall in customer funds, which made it a solvency scandal rather than a regulatory one.
Crypto, then Kalshi
PredictIt arrived in 2014 under a CFTC no-action letter, with trades limited to $850 per contract per market and only political and current-events topics. The CFTC moved to revoke the letter in 2022. The fight ran into 2023 and PredictIt survived, though with a smaller scope.
Augur, launched on Ethereum in 2018, had no company to sue and no KYC, and token holders settled disputes by consensus. Thin order books and slow resolution kept it from real use. Polymarket’s design, with on-chain settlement, off-chain order matching and a separate oracle, answers Augur’s failures directly.
Polymarket started in 2020 on Polygon, settling in USDC and using UMA’s optimistic oracle for disputes. Its election market during the 2024 US race became the most-watched forecast of the contest, and monthly trading peaked at over $3 billion. It was formally closed to Americans: in January 2022 it settled with the CFTC for $1.4 million over unregistered event contracts and agreed to block US users.
Kalshi went through the front door. The CFTC designated it a contract market in November 2020, the first federally regulated exchange built for event contracts. When it tried to list contracts on which party would control Congress, the agency disapproved them in September 2023. Kalshi sued and won in federal court in September 2024. Election contracts went live that October.
Sports and the money
Kalshi began listing sports contracts in January 2025. Within a year they made up more than 80% of all prediction market volume. The CFTC dropped its appeal in May 2025. Industry volume rose from $15.8 billion in 2024 to $63.5 billion in 2025.
Polymarket bought QCEX, a CFTC-licensed exchange, for $112 million. Intercontinental Exchange, which owns the New York Stock Exchange, committed up to $2 billion. Kalshi raised money at an $11 billion valuation in December 2025.
States pushed back. Nevada, Massachusetts, Maryland and Ohio moved against sports event contracts, and Arizona filed criminal charges against Kalshi in March 2026. That month Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act, which would classify event contracts as gambling rather than derivatives. Analysts project $200 billion to $325 billion in volume for 2026.
