Prediction markets drew $3.7B in VC funding and made twentysomething founders billionaires. Now a new wave of college-age startups is racing to claim their share.
Not long ago, prediction markets were a niche curiosity, the kind of thing you might encounter in an economics paper or a debate among forecasting enthusiasts. Today they are one of the hottest sectors in venture capital, valued in the tens of billions, with trading volumes that rival some established financial exchanges. And increasingly, the people building the next generation of these platforms are barely out of college.
The origin story of this boom is by now fairly well known. Polymarket, founded by Shayne Coplan, who was 27 when the company became a phenomenon, and Kalshi, co-founded by two 29-year-olds, raised a combined $3.7 billion in 2025. Those funding rounds minted a new class of very young billionaires and made prediction markets impossible to ignore. Since then, investors have been falling over each other to back whatever comes next.
“Prediction markets are moving so quickly into the mainstream in a way where I think the amount of money being traded is going to go 100x in the next 5 years.”
Goldberg is not alone in that view. Across Silicon Valley and beyond, venture capitalists describe prediction markets as one of the most active areas for new pitches and founder interest. At least a dozen early-stage startups have emerged over the past year, each taking a different approach to the space: derivatives-style products, aggregation tools, niche verticals, sports-focused exchanges, and infrastructure services that help the big platforms operate at scale.
The startups racing into the space
The most visible sign of the moment is the age and background of the founders raising money. Kairos, a prediction market startup, announced a $2.5 million seed round in February 2026. Its co-founder, Jay Malavia, is 22 years old.
“Kairos means the opportune moment in time, and I think this is the right moment in history.”
Then there is Novig. Founded in 2021 by two cofounders while they were students at Harvard University, the New York-based startup launched its sports prediction market as a game in early 2024 before applying to the Commodity Futures Trading Commission for permission to allow real-money trading. The company has raised $33 million from a roster of investors that includes Forerunner Ventures and former NFL quarterback Joe Montana. In February 2026, Novig announced a $75 million Series B led by blockchain venture firm Pantera Capital, which values the company at $500 million.
Novig’s CEO, Jacob Fortinsky, captures the urgency many founders in this space feel about timing.
“The current administration has changed things. We certainly don’t want to miss the moment.”
Rivals putting competition aside to fund what comes next
Perhaps the most striking signal of just how seriously the prediction market industry is taking its own future is the story of 5c(c) Capital, a new venture fund launched in March 2026 by two former Kalshi employees: Adhi Rajaprabhakaran, who was the second trader hired at Kalshi’s affiliated market maker, and Noah Zingler-Sternig, Kalshi’s former head of operations and the person who led its integration with Robinhood.
The fund is raising up to $35 million and plans to invest in approximately 20 early-stage companies focused on the infrastructure around prediction markets: market makers, index designers, data tools, liquidity services, and compliance systems. What makes the fund unusual is its backer list. Both Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan, fierce rivals in one of Silicon Valley’s most competitive head-to-head battles, have invested in it.
How prediction markets went from niche to a $22 billion industry
To understand why investors are so eager to back young founders in this space, it helps to understand how quickly the industry has grown. In 2025, traders wagered more than $40 billion combined across Kalshi and Polymarket. In January 2026 alone, more than $10 billion changed hands on both platforms, including $550 million bet on the outcome of Super Bowl LX. Polymarket’s monthly trading volume has surged from roughly $1.2 billion in 2025 to more than $20 billion in early 2026, with active wallets more than tripling in six months.
Neither Kalshi nor Polymarket is profitable yet, but that has not stopped investors from placing enormous bets on their futures. In early 2026, Kalshi was raising $1 billion at a reported valuation of $22 billion, roughly double the $11 billion valuation it achieved just months earlier. Polymarket was in discussions for a new round that would value it at around $20 billion. Major platforms including Coinbase, Kraken, and Robinhood have all entered or partnered with the space, bringing new distribution and legitimacy to an industry that was largely unknown to most Americans just two years ago.
What the next generation of startups is actually building
The new wave of startups is not simply building more prediction market exchanges. That field is already crowded, and competing head-to-head with Kalshi and Polymarket for general trading volume would be an uphill battle for a seed-stage company. Instead, the most interesting new companies are building around the platforms: tools that help traders analyze and structure their positions, infrastructure that provides liquidity to the markets, compliance and data services that help hedge funds and crypto firms interact with the platforms at scale, and entirely new market structures that the incumbents have not pursued.
XO Market, which raised a $6 million seed round from 20VC, Picus Capital, and Coinbase Ventures, is taking a notably different philosophical approach. Rather than curating its own list of events for users to trade on, XO lets users create and run their own prediction markets, positioning the platform as the user-generated alternative to the more centralized models of Kalshi and Polymarket.
“Today’s major platforms act more like Netflix. They decide what markets exist. We’ve flipped that model entirely.”
The regulatory question hanging over everything
For all the enthusiasm, the prediction market industry is not without serious complications. The legal and regulatory landscape remains genuinely unsettled. Several states have attempted to restrict or shut down sports-based prediction markets, arguing that they constitute gambling under state law. Kalshi and Polymarket have argued in response that federal CFTC oversight of their platforms as financial derivatives supersedes state authority, a legal position that is still being tested.
Polymarket was banned from the United States in 2022 for offering unlicensed betting, though its U.S. trading arm is now working toward a legal relaunch. Novig itself navigated through a registered sports betting model in Colorado before switching to a sweepstakes format, then ran into legal challenges from state regulators before pivoting to the CFTC approval pathway it is now pursuing.
None of this has dampened investor enthusiasm. If anything, many VCs appear to view regulatory uncertainty as a feature of the moment rather than a reason for caution, betting that federal regulators, particularly under the current administration, will ultimately clarify the rules in the industry’s favor.
Whether this wave of young founders and their investors are riding a genuine financial revolution or the front edge of a speculative bubble remains an open question. The honest answer is that nobody knows, which is, in a way, exactly what prediction markets are designed to help figure out. For now, the money keeps flowing, the founders keep getting younger, and the bets keep getting bigger.