Offshore Prediction Markets Hit $34B

The Signal

The Coalition for Prediction Markets put a number on U.S. offshore leakage: up to $34 billion in trading volume over the 12 months ending April 2026, according to a study conducted with Rutgers professor Harry Crane and reported by Decrypt and Yahoo Finance. The industry group, whose members include regulated U.S. operators such as Kalshi, Crypto.com, and Coinbase, estimates offshore platforms captured 12.5% to 31.5% of U.S. prediction-market activity.

Polymarket accounts for most of the identified offshore volume. The study estimates $10.6 billion to $26.7 billion of Polymarket’s $55.6 billion trailing-12-month trading volume came from U.S. users, despite the platform formally disallowing U.S. access.

The projection is bigger than the current regulatory fight. If relative market shares hold, U.S.-based activity on offshore prediction markets could reach $133 billion in annual volume by 2030.

The Mechanism

• The Coalition is turning offshore access into a licensing argument. Kalshi and other regulated venues now have a headline number for the claim they made in the Kentucky tax fight: punitive or fragmented state treatment pushes demand toward venues outside CFTC oversight.

• Polymarket’s liquidity lead is becoming a policy liability. The platform’s $55.6 billion trailing volume gives it unmatched market depth and media relevance, but the estimated U.S. participation range gives regulators and lawmakers a concrete target when they talk about VPN leakage, KYC gaps, and market surveillance.

• Regulated platforms get a cleaner commercial pitch. Kalshi can point to onshore verification, CFTC supervision, tax reporting, and market-integrity controls as product features rather than compliance costs. The challenge is whether users will pay the spread, fees, and product limitations that come with that wrapper.

• The study strengthens the case for federal preemption. If U.S. demand is already reaching offshore order books at scale, state-by-state taxes and restrictions risk fragmenting the regulated side while leaving the largest liquidity pools untouched.

• Crypto-native distribution remains the offshore advantage. Polymarket benefits from wallets, stablecoins, global liquidity, and social sharing. Kalshi benefits from legality, banking rails, and institutional defensibility. The $34 billion estimate shows how far distribution can outrun permissioning.

• Affiliate and integrity controls are now part of the same story. Kalshi and Polymarket’s recent moves to restrict paid creators from spreading election-denial content, reported by WIRED and The Guardian, are no longer just election-cycle cleanup; they are evidence in the broader fight over whether prediction markets can self-police at consumer scale.

The Landscape

Market Position: Polymarket remains the offshore liquidity benchmark, with the Coalition study putting its trailing-12-month volume at $55.6 billion and U.S.-attributable volume at $10.6 billion to $26.7 billion. Kalshi’s advantage is regulatory status, not raw global liquidity. World Cup demand is widening the gap between platforms that can aggregate consumer flow quickly and platforms that can defend that flow in court: Bernstein projected $5 billion to $10 billion in prediction-market volume tied to the tournament, while reported daily volumes moved from $2.2 billion on June 11 to $4.8 billion on June 12, per The Block and Yahoo Finance.

Regulatory Environment: The CFTC’s proposed rulemaking on what qualifies as “gaming” is now running alongside state tax fights and offshore-volume evidence. The agency is weighing event-contract limits, including proposed restrictions on markets tied to war or assassination, while states challenge federal jurisdiction and Kentucky’s 14.25% prediction-market tax faces a coalition lawsuit backed by Kalshi. Chairman Mike Selig’s “see you in court” posture and Senator Elizabeth Warren’s questions about CFTC capacity both point to the same bottleneck: the regulated market is scaling faster than the oversight architecture around it.

Key Data

• $34 billion: Estimated U.S. resident trading volume on offshore prediction markets during the 12 months ending April 2026.

• 12.5%–31.5%: Estimated offshore share of total U.S. prediction-market activity, including regulated and offshore venues.

• $55.6 billion: Polymarket trailing-12-month trading volume cited in the Coalition study.

• $10.6 billion–$26.7 billion: Estimated Polymarket volume attributable to U.S. users despite the platform’s U.S. access restrictions.

• $133 billion: Projected annual U.S.-based offshore prediction-market volume by 2030 if current relative shares persist.

What’s Next

The CFTC’s gaming-definition rulemaking is the next industry catalyst. Regulated platforms will use the $34 billion offshore estimate to argue for broader federally supervised access, while states will use the same growth curve to justify taxes, restrictions, and gambling-style treatment. The commercial stakes are straightforward: if onshore platforms win clearer federal protection, Kalshi and its peers can convert offshore leakage into regulated volume; if state friction spreads, Polymarket’s offshore liquidity lead gets harder to dislodge.

Predict This covers the evolution of prediction markets — platforms, regulation, volume, and methodology. For questions or tips: reply to this email.

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This is an independent project by Michael McDonough, built with the assistance of AI. Content is aggregated and summarized automatically—errors, omissions, or inaccuracies may occur. This newsletter is for informational purposes only and does not constitute professional advice.