History of Prediction Markets: From the Iowa Electronic Markets to Polymarket and Kalshi
Trace the history of prediction markets from the 1988 Iowa Electronic Markets through Intrade, Kalshi, and Polymarket. Learn how regulation, accuracy, and volume shaped the market.
- Sides Team
- /July 28, 2026
- /5 min read
The history of prediction markets traces back to 1988 and the launch of the Iowa Electronic Markets (IEM). The 2000s brought commercial platforms like Intrade, but U.S. regulatory pressure forced its withdrawal by 2012. Kalshi secured CFTC approval in 2021 as the first regulated U.S. event-contract exchange, while Polymarket launched a decentralized, crypto-native model that surged during the 2020 election cycle. Today the field splits into regulated domestic exchanges and blockchain-based platforms, each tracing back to the same premise IEM first tested: real-money incentives produce actionable forecasts.
Both models differ in custody, regulation, and trader access, but they share the core mechanics of outcome-based pricing.
What were the Iowa Electronic Markets?
The Iowa Electronic Markets launched in 1988 as real-money futures markets run by the University of Iowa's business school. Traders bought and sold contracts tied to vote shares or election winners, letting prices aggregate expectations in real time.
Because participants risked actual money, IEM served as a teaching tool and research lab. Its early results showed that market prices could rival traditional polling, a concept that still underpins prediction market design. If you are new to the concept, see our guide to what is a prediction market.
How did prediction markets move from academia to mainstream trading?
After IEM proved the concept, commercial platforms brought prediction markets to wider audiences. TradeSports launched in 2000, followed by Intrade in the early 2000s, offering event contracts on politics, entertainment, and current events.
These platforms introduced retail traders to outcome-based markets but collided with U.S. regulators. By 2012, Intrade halted service for American customers, showing that mainstream adoption required clarity on whether these markets were financial instruments or gambling products. The closure cleared space for compliance-first and decentralized successors. For background on mechanics, see how do prediction markets work.
When did Kalshi launch, and what role does regulation play?
Kalshi launched in 2021 after becoming the first platform to win CFTC approval as a regulated U.S. event-contract exchange. Its authorization created a federal pathway for trading binary outcomes—such as economic statistics and political events—outside traditional sports betting frameworks.
Kalshi volumes remain modest compared with global markets, but its existence proved that structured prediction markets can operate under U.S. commodity regulations. Regulatory status still varies by jurisdiction, affecting which products U.S. residents can access. For current rules, see our guide to prediction market regulation in the US.
How does Polymarket work, and how does it fit into prediction market history?
Polymarket is a decentralized platform where users trade event contracts on blockchain infrastructure without a traditional intermediary holding funds. It represents the crypto-native branch of prediction market evolution.
The 2020 election marked a turning point for Polymarket: millions of dollars flowed into presidential betting markets, drawing mainstream attention to blockchain-based forecasting. Polymarket historical data from that cycle showed markets adjusting faster than poll aggregates as news developed. In 2022, Polymarket settled with the CFTC over allegations of unregistered event-based swaps, confirming that regulatory boundaries apply even to decentralized operators. Learn more in our guide on how do prediction markets work.
Are prediction markets accurate?
Historical data shows prediction markets have often matched or outperformed traditional polls. IEM prices demonstrated accuracy in U.S. presidential races, frequently aligning with or moving ahead of major surveys. During the 2020 election cycle, Polymarket also adjusted faster than poll aggregates as news developed.
That said, markets are not always right. Prices can reflect participation biases, liquidity gaps, and risk premiums rather than pure probabilities. Trading involves risk of loss, and past performance does not guarantee future results. For a direct comparison with traditional forecasting, see our analysis of prediction markets vs polls.
How do prediction markets make money?
Platforms generally earn revenue through transaction fees, bid-ask spreads, or withdrawal charges. They match buyers and sellers rather than acting as counterparties, collecting a small commission on each trade. Trader gains or losses depend entirely on price movement before resolution. For a deeper explanation, visit how do prediction markets work.
What are event contracts?
Event contracts are short-term, outcome-based instruments that pay a fixed amount if a stated condition occurs. They serve as the foundational unit of modern prediction markets. For a full definition, see our article on what is an event contract in trading.
Which prediction market is the most accurate?
No platform holds a universal accuracy advantage. IEM performed well in controlled academic settings with smaller trader pools, while modern platforms like Polymarket and Kalshi draw different demographics and liquidity levels. Accuracy depends on participation, market depth, and the type of event being priced. A thinly traded contract on a niche topic is generally less reliable than a heavily liquid presidential market.
What drives prediction market volume?
Presidential betting markets have consistently generated the highest prediction market volume from IEM through the 2020 election cycle. U.S. presidential elections attract traders because they offer binary outcomes, continuous news cycles, and broad public interest. That pattern has repeated across platforms and regulatory eras, confirming politics as the primary catalyst for mainstream attention and liquidity.
Sides.Trade continues this lineage by offering decentralized prediction market access directly inside Telegram, combining the open price-discovery principles IEM pioneered with the accessibility of modern messaging platforms.
FAQs
Modern prediction markets began in 1988 with the Iowa Electronic Markets. They evolved through commercial platforms like Intrade, regulatory crackdowns, and finally into today's split between CFTC-regulated exchanges like Kalshi and decentralized platforms like Polymarket.
The Iowa Electronic Markets were real-money futures markets launched by the University of Iowa in 1988. They allowed traders to buy and sell contracts tied to election outcomes, proving that incentivized prices could forecast results alongside or ahead of traditional polls.
Platforms earn revenue through trading fees, spreads, and sometimes withdrawal charges. Traders profit only by buying low and selling high or holding a correct contract to expiration.
Historical data shows prediction markets have often matched or outperformed traditional polls in election forecasting. However, markets are not always right, and past performance does not guarantee future results.
Polymarket is a decentralized platform where users trade event contracts on blockchain infrastructure. It operates without a traditional intermediary, though it still operates under regulatory oversight, as shown by its 2022 CFTC settlement.
Event contracts are short-term, outcome-based instruments that pay a fixed amount if a specific condition occurs. They are the standard trading unit in modern prediction markets. Read more in our event contract guide.
Kalshi launched in 2021 after receiving CFTC approval as the first regulated U.S. exchange for event contracts.
Regulatory status varies by platform and jurisdiction. Some exchanges hold CFTC registrations, while others operate offshore or in decentralized frameworks. See our regulation guide for details.
No platform is universally the most accurate. IEM performed well in academic contexts, while modern platforms vary by liquidity and trader participation. Accuracy depends on the specific event and market conditions.
Prediction markets use peer-to-peer pricing and typically cover political, economic, and cultural events, while sports betting relies on bookmaker odds and focuses on athletic competition. For more, see our comparison of prediction markets vs sports betting.
