Prediction markets projected to reach $64 billion by 2025, but dependence on centralized logins has led to a significant security vulnerability.

Prediction markets gained significant traction in 2025, experiencing a fourfold increase in annual trading volume as a select few platforms consolidated their influence over what is swiftly evolving into an institutional-grade product, as outlined in a recent report by blockchain security firm CertiK.

The overall volume for the sector escalated from $15.8 billion in 2024 to $63.5 billion in 2025, according to the report, with activity remaining robust following the US election cycle and continuing into January 2026.

Prediction Market Monthly Volume in 2025 (Source: CertiK)

This sustained activity is significant as it indicates that election-related trading did not merely represent a temporary surge but rather an event that attracted new users to engage repeatedly.

Importantly, the week ending January 18 marked a record of approximately $6 billion in notional volume, as reported, illustrating the rapid transition of prediction markets from a niche crypto offering to a high-activity trading platform.

Nonetheless, CertiK’s primary assertion is that the forthcoming growth phase is encountering an integrity challenge that is more related to the layers governing user onboarding, the “true” interpretation of volume, and the systems determining payouts.

A three-platform market with single-point failures

According to CertiK, three platforms now represent over 95% of global prediction market volume, each pursuing distinct strategies for dominance.

Kalshi, operating as a regulated venue in the US, is positioned as the compliance-oriented model. Polymarket has secured the largest share of participation from both crypto-native and international users.

In contrast, Opinion is the rapidly expanding newcomer, leveraging ecosystem incentives to grow from virtually nothing to about 30% market share within a few months, as stated in the report.

This concentration transforms operational challenges into systemic risks.

A failure at any major platform is no longer an isolated incident; it represents a market-wide trust disruption that can ripple through liquidity pools, data feeds, and user balances, especially as brokers and mainstream distribution begin to regard prediction probabilities as a new category of informational product.

CertiK highlights a December 2025 incident involving Magic.link, Polymarket’s third-party authentication provider, as an indication of where the sector is most vulnerable.

Accounts utilizing Web2-style login methods, such as email or social media authentication, were compromised, putting funds in those accounts at risk, while the on-chain settlement layer remained intact.

In CertiK’s perspective, this was an identity failure rather than a settlement failure, underscoring the tradeoff of “Web2.5” onboarding: a more seamless user experience at the cost of centralized failure points.

This revelation is challenging for an industry that promotes itself on the basis of decentralization.

Prediction markets can facilitate fully collateralized on-chain settlement while still facing the same third-party risks that affect traditional fintech, including authentication, account recovery, and platform-level access controls.

When the tape lies but the odds still talk

The report also distinguishes between two concepts that are frequently conflated in crypto markets: trading volume as an indicator of adoption and probability outputs as a measure of information.

According to the report, incentive programs can artificially inflate activity without necessarily enhancing the quality of forecasting signals.

CertiK noted that wash trading remains prevalent, citing research that estimates artificial volume reached as high as 60% on certain platforms during peak airdrop-farming periods.

This distortion can mislead external observers, including potential institutional users, regarding liquidity depth and genuine participation.

However, CertiK contends that the more critical question is whether the probabilities continue to be useful even when the data is distorted.

The report suggests that while wash trading has inflated volume metrics, it has not yet compromised price accuracy, and probability outputs have remained dependable for forecasting.

This creates tension for platforms aiming to transition to mainstream finance; they may be able to position themselves as information utilities even if their activity metrics are partially fabricated by incentives.

It also presents a more challenging strategic decision for market leaders.

If distribution and credibility hinge on the quality of information, platforms may need to adopt a less tolerant stance towards behaviors that enhance volume in the short term but undermine the perception and trust essential for attracting institutional capital.

Chain migration and the new execution plumbing

Beyond the headline figures, CertiK outlines a structural shift in how prediction market liquidity is executed.

Polygon maintained “legacy dominance” throughout the November election cycle, as reported, but BNB Chain volume began to rise significantly in late 2025, coinciding with Opinion’s rapid incentive rollout.

By the week of January 19, CertiK indicated that BNB Chain activity had effectively reversed the historical hierarchy, capturing the majority of weekly flows and relegating off-chain settlement to a secondary role, even as Kalshi achieved record performance during NFL playoff trading.

Prediction Markets Volume by Chain (Source: CertiK)

This transition is more than just a tally for blockchain ecosystems. It alters who can participate, how trades are settled, and which market structures are viable.

CertiK observes that many on-chain venues are shifting from automated market makers to central limit order books implemented directly on high-throughput chains, a design that yields tighter spreads and more familiar mechanics for professional traders.

In practice, this also brings prediction markets closer to an exchange-like microstructure, with the associated risks of front-running and the MEV-style transaction-ordering disadvantages on public networks.

The oracle problem, the moment where “truth” becomes a payout

If there is a singular tail risk that unifies the sector’s growth narrative, it is resolution, the process that transforms probabilities into cash.

Prediction Market Security Risks (Source: CertiK)

CertiK identifies oracle manipulation as the primary technical attack vector since market-resolution mechanisms directly influence fund distribution.

It also notes that ambiguous market definitions have already led to disputes across all major platforms throughout 2025, particularly where political outcomes or contested official results create uncertainties.

The report outlines the primary resolution models across the leading platforms.

Polymarket is described as utilizing UMA’s optimistic oracle, where outcomes resolve automatically unless challenged within a specified window, with disputes escalating to votes by UMA token holders.

Kalshi is characterized as employing centralized arbitration, with human arbiters determining outcomes based on authoritative sources.

Opinion is depicted as relying on consensus oracles, where designated parties must concur on an outcome.

Each model carries distinct trust assumptions. Optimistic oracles can be swift for clear outcomes but introduce edge-case vulnerabilities, including the risk that large token holders may sway votes in low-liquidity disputes.

Centralized arbitration is predictable but necessitates trust in the platform operator. Consensus oracles distribute authority but still rely on the incentives and integrity of the appointed resolvers.

As prediction markets expand, these tradeoffs become increasingly difficult to overlook.

The sector can manage occasional edge-case controversies when it is a crypto novelty. However, it transforms into a governance crisis when market probabilities start to appear in mainstream distribution channels or are utilized by institutions as inputs for risk assessments.

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