Polymarket vs PredictIt: What Changed

PredictIt and Polymarket represent two generations of prediction markets. PredictIt, launched in 2014, was a pioneer that made prediction market trading accessible to US residents under a CFTC no-action letter. It operated with significant constraints — an $850 per-market position limit, high fees, and a limited market selection — but built a passionate community of political forecasters and traders. Polymarket, launched in 2020, represents the next evolution: a crypto-native platform with no position limits, no explicit fees, and trading volumes that dwarf PredictIt's entire lifetime activity in a single election cycle.

The transition from PredictIt to Polymarket was not seamless. PredictIt's CFTC no-action letter was withdrawn in 2023, forcing the platform to wind down operations and leaving its community without a regulated US alternative. Polymarket emerged as the de facto successor, but its crypto-native architecture and lack of US regulatory approval mean it serves a different audience in a different way. Understanding what changed — and what was gained and lost — provides context for anyone navigating today's prediction market landscape.

PredictIt's greatest contribution was demonstrating that prediction markets could work as a mainstream product for political forecasting. Before PredictIt, prediction markets were an academic concept discussed in economic papers and niche communities. PredictIt made them tangible — you could sign up with a credit card, deposit $50, and start trading on the next presidential election. The platform's academic affiliation (operated by Victoria University of Wellington for research purposes) gave it legitimacy, and its CFTC no-action letter provided the legal cover needed to attract over 100,000 US-based traders.

However, PredictIt's constraints were severe. The $850 per-market position limit capped each trader's maximum risk, which also capped their potential return and limited the platform's utility for serious traders. The fee structure — 5% on withdrawals and 10% on profits — was punitive, eating into already-thin prediction market margins. And the market selection was narrow, focusing primarily on US politics with occasional forays into economics and world events. These limitations meant that PredictIt was always more of a hobby platform than a professional trading venue.

PredictIt's community was its most valuable asset. The platform cultivated a dedicated group of political analysts, poll watchers, and amateur forecasters who engaged deeply with every race and developed genuine expertise in translating political knowledge into probabilities. Many of these traders migrated to Polymarket after PredictIt's wind-down, bringing their political forecasting skills to a platform with far more liquidity and flexibility. The intellectual capital that PredictIt developed continues to influence prediction market culture today.

Polymarket's rise was driven by three factors: unlimited position sizes, zero explicit fees, and the crypto boom. By removing PredictIt's $850 cap, Polymarket allowed serious traders to deploy meaningful capital — hundreds of thousands or even millions of dollars on a single market. This attracted professional traders, market makers, and institutional participants who would never have bothered with PredictIt's constrained environment. The result was dramatically deeper liquidity, tighter spreads, and more efficient prices.

The absence of explicit trading fees fundamentally changed the economics of prediction market strategies. On PredictIt, the 10% profit fee made many marginal strategies unprofitable — arbitrage, scalping, and market-making were all hobbled by the tax on every successful trade. On Polymarket, with no explicit fees, these strategies became viable, and the influx of market makers who pursued them drove spreads down and liquidity up in a virtuous cycle. The platform's crypto-native infrastructure also meant near-instant settlement and minimal friction for deposits and withdrawals.

The 2024 US presidential election was the event that cemented Polymarket's dominance. The platform processed over $3 billion in trading volume on the election, attracting mainstream media coverage and public attention that PredictIt had never achieved at scale. High-profile traders, political commentators, and media outlets began citing Polymarket prices as authoritative probability estimates, giving the platform a cultural relevance that went far beyond its crypto-native origins. By the time PredictIt completed its wind-down, Polymarket had already replaced it as the default reference for prediction market prices.

The most impactful difference is scale. PredictIt's per-trader cap of $850 per market meant total market liquidity was structurally limited. Even if 10,000 traders participated in a market, the maximum possible open interest was $8.5 million. Polymarket has no such limit — a single trader can deploy millions, and total open interest on major markets routinely exceeds $100 million. This scale difference is not incremental; it fundamentally changes the nature of the market. Polymarket's prices reflect the views of participants with serious capital at stake, while PredictIt's prices reflected the views of participants limited to pocket money.

The onboarding experience differs dramatically. PredictIt accepted credit cards and bank transfers, making it accessible to anyone with a US bank account. Polymarket requires a crypto wallet and USDC on the Polygon network — a significant barrier for non-crypto-native users, despite the platform's efforts to simplify onboarding with integrated wallets and fiat on-ramps. This difference in accessibility means Polymarket's trader base skews more crypto-savvy and technically sophisticated, while PredictIt attracted a broader demographic including many people who had never touched cryptocurrency.

Regulatory status is the most consequential difference. PredictIt operated under a CFTC no-action letter that provided legal clarity for US traders. When that letter was withdrawn, US-based PredictIt users lost their legal prediction market option (aside from Kalshi). Polymarket has geo-blocked US users from its front end, creating a legal gray area. For US traders, the transition from PredictIt to Polymarket involves accepting significantly more regulatory ambiguity — a tradeoff that many are willing to make for the superior trading experience but that others find unacceptable.

PredictIt's regulatory path — operating under a CFTC no-action letter — proved to be fragile. No-action letters provide temporary regulatory shelter but can be withdrawn at the agency's discretion, as PredictIt discovered. The withdrawal left the platform with no viable path to continue operations, and its community of traders had to migrate to other platforms or stop trading. This outcome demonstrated that building a prediction market on a no-action letter is a risky long-term strategy, as the regulatory foundation can shift without warning.

Polymarket's regulatory path remains uncertain. The platform paid a $1.4 million CFTC settlement in 2022 and has since geo-blocked US users, but it has not pursued a US regulatory license. Its primary audience is international users who are not subject to CFTC jurisdiction. Whether Polymarket eventually seeks US regulatory approval, continues to operate outside the US regulatory framework, or faces further enforcement action will depend on the evolving political and regulatory environment around crypto and prediction markets.

The broader regulatory trend is toward greater acceptance of prediction markets. Kalshi's successful legal battle to list election contracts, the bipartisan interest in prediction markets as forecasting tools, and the growing public familiarity with platforms like Polymarket all suggest that regulation will become more accommodating over time. For traders, the practical advice is to understand the regulatory status of whatever platform you use, maintain compliance with your local jurisdiction, and diversify across platforms to reduce regulatory concentration risk. The tools on <a href="https://0xinsider.com">0xInsider</a> work regardless of which platform you trade on, providing analytics that help you make better decisions in any regulatory environment.