Prediction markets are poised for significant growth in 2026, with platforms like Kalshi and Polymarket experiencing surges in trading volumes and capital inflows. Despite a dip post-2024 US elections, these markets have rebounded, attracting interest from traditional financial firms and gambling platforms. However, regulatory challenges loom, with authorities scrutinizing these platforms as potential unlicensed sportsbooks. Competition is intensifying as major players like Coinbase, Crypto.com, and Robinhood enter the fray. Robinhood, in particular, plans to launch its own prediction market, potentially sidelining its partner Kalshi. Meanwhile, legal battles continue, with Kalshi and others facing cease-and-desist orders from state gaming commissions, challenging their operations as unlicensed betting platforms. As prediction markets argue their legitimacy as commodities rather than gambling, the sector's future hinges on regulatory outcomes and the upcoming midterm elections. The industry's ability to navigate these challenges will determine its trajectory in 2026 and beyond.