"Bet on Anything": Prediction Markets Go Mainstream Amid Regulatory Scrutiny

Prediction markets—crypto-native venues that let users trade on the outcomes of real-world events—are moving from niche DeFi experiments to mainstream conversations. From elections to sports and macro data releases, these markets are increasingly liquid, tech-enhanced, and visible. At the same time, regulators are sharpening their focus on event-based derivatives, making 2025 a pivotal year for builders, traders, and compliance teams.

This article unpacks why prediction markets are surging, how blockchain infrastructure made them cheaper and faster, what the legal landscape looks like, and how self-custody best practices help protect participants.

Why this moment?

• Global attention cycles are dominated by elections, sports, and economic uncertainty, all of which map naturally to tradable outcomes.
• Crypto infrastructure has improved dramatically: low fees, better oracles, and usable wallets have pushed UX closer to “web2-level” convenience.
• Academic and empirical evidence continues to show that market-based forecasts can aggregate dispersed information efficiently, providing alternative signals to polls and punditry. For a foundational overview, see the NBER survey on prediction markets by Wolfers and Zitzewitz (click the linked paper at the end of that abstract) Prediction Markets (NBER).

The infrastructure shift: faster, cheaper, safer

Two technical changes unlocked adoption:

• Rollups and data availability upgrades. Ethereum’s scaling roadmap, including proto-danksharding, has driven down L2 transaction costs and improved throughput Ethereum roadmap: proto-danksharding. Popular L2s such as Base and Arbitrum have provided developer-friendly platforms for event-driven apps Optimistic rollups explained.
• Oracles matured. Tamper-resistant data feeds, optimistic dispute mechanisms, and improved circuit designs reduced settlement risk for markets that rely on external outcomes. See reference implementations and best practices for decentralized data feeds Chainlink data feeds docs.

The result: markets with faster listing cycles, lower fees, and clearer resolution rules, all essential for retail accessibility and institutional interest.

Regulatory scrutiny: clear lines and gray zones

Event-based trading sits at the intersection of derivatives, betting, and information markets, which makes regulatory interpretation complex.

• In 2022, the U.S. Commodity Futures Trading Commission (CFTC) ordered a major crypto prediction platform to pay a civil penalty and wind down certain markets for operating unregistered event-based binary options CFTC Polymarket order.
• The CFTC’s long-standing advisory on “event contracts” outlines how economic purpose, public interest, and fraud/gambling concerns factor into oversight CFTC advisory on event contracts.
• Regulated paths exist. The CFTC maintains a registry of Designated Contract Markets (DCMs), where event contracts can be listed under established rulesets CFTC Designated Contract Markets.

Beyond derivatives law, financial crime controls are central. U.S. authorities have assessed the illicit finance risks in decentralized finance, elevating KYC/AML expectations for frontends and intermediaries FinCEN DeFi Illicit Finance Risk Assessment. In the EU, MiCA established a comprehensive framework for crypto-asset service providers, influencing stablecoin issuance and disclosure across the bloc EU MiCA Regulation.

Expect continued engagement on:

• Political outcome markets and their compatibility with derivatives law.
• Consumer protection (disclosures, resolution procedures).
• Stablecoin usage and fiat on/off-ramps in event trading ecosystems.

Centralized vs. decentralized approaches

• Regulated venues: Event contracts listed on registered markets can offer clearer rulebooks, customer protections, and data-sharing frameworks—at the cost of narrower market catalogs and KYC requirements.
• Decentralized venues: Permissionless creation and global access make these platforms agile, but they face geo-restrictions, evolving enforcement, and higher responsibility on the user side for self-custody and risk management.

Hybrid patterns are emerging: compliant frontends over open protocols, whitelisted oracles, and geofenced interfaces to balance access with local rules.

Resolution, liquidity, and UX: what users care about

• Precise resolution criteria. Well-defined outcomes and redundancy in data sources reduce disputes. Reference-linked resolutions (official government releases, league statistics, court documents) increase confidence.
• Liquidity depth. AMMs and order books on L2s lower slippage and enable hedging around major calendar events.
• Fee predictability. Post–proto-danksharding fee dynamics make active trading more feasible for retail without eroding edge Ethereum roadmap context.

Risk management for traders

• Outcome risk: Markets can resolve unexpectedly due to ambiguous criteria or unforeseen events. Read resolution documents carefully and avoid overexposure to single narratives.
• Smart contract risk: Favor audited contracts and platforms with clearly documented emergency procedures, timelocks, and multisig policies.
• Oracle risk: Understand the escalation process. Systems using dispute windows and bonded staking can mitigate manipulation Decentralized data feeds reference.
• Compliance risk: Be aware of local rules, platform geoblocking, and any KYC obligations. Reference official guidance where available CFTC event contracts framework and FinCEN risk assessment.

Self-custody matters more when “everything is tradable”

When markets proliferate, the attack surface widens: fake frontends, malicious approvals, and rushed signings during news spikes. Using a hardware wallet for signing protects private keys from compromised browsers and wallets.

If you participate in DeFi prediction markets, consider:

• Transaction review on a trusted display before approval.
• Per-market allowances and periodic revocation for stale approvals.
• A layered setup: watch-only wallet on desktop, hardware wallet for signing.
• Passphrase and multisig for higher-value accounts.

OneKey can be a practical choice for these workflows because it is open-source, supports major EVM chains and L2s, integrates with WalletConnect for dapps, and provides clear signing prompts on-device. For traders who move frequently between markets, this combination of transparency and usability helps reduce operational risk while maintaining self-custody.

What to watch in 2025

• Regulatory updates on political contracts and consumer protections across jurisdictions.
• More standardized resolution frameworks, potentially anchored to official data sources for elections and macro releases.
• Deeper liquidity on L2s like Base and Arbitrum as costs and tooling improve Optimistic rollups overview.
• Institutional products bridging compliance-first venues with on-chain settlement rails.

Bottom line

Prediction markets are entering the mainstream thanks to scalable blockchains, better oracles, and global interest in tradable outcomes. Yet legal classification and consumer protection remain front and center. If you trade these markets, treat self-custody as non-negotiable, verify resolution criteria, and keep an eye on official guidance and registered venues for clarity CFTC Designated Contract Markets. In volatile, event-driven environments, a hardware wallet like OneKey can help you participate confidently while safeguarding your keys.