Varun Datta, venture capitalist and CEO of Truth Ventures, explores why prediction markets are emerging as one of Web3’s most compelling real-world applications.
If you have used Polymarket or Kalshi, you probably think of them as somewhere to place a quick bet on an election or a match. However, they are quickly evolving beyond this simple function into something more embedded and infrastructural.
Traders put around $44.8 billion through Kalshi and Polymarket in June 2026. These two are among the largest prediction markets in the world now.
To put that into perspective, every legal sports betting site in the U.S. combined handles $14 billion a month. Prediction markets are now more than three times bigger.
How Do Prediction Markets Actually Work?
If you are new to these platforms, the mechanics are simple.
- You buy a contract tied to a real-world event, and each contract costs between $0.01 and $0.99.
- If the event happens, the contract pays out accordingly, and if it does not, it doesn’t pay anything.
- So a contract trading at $0.60, for instance, means that the market as a whole thinks there’s a 60% chance of the event happening. The price is the forecast.
Most public debate around these platforms is whether they’re gambling. Varun Datta, founder and CEO of Truth Ventures, thinks that argument misses where the real value sits.
“The bet is just the money the consumer pays into the platform, but really, what matters is the price it generates. When participants on prediction market platforms create these prices, it’s something that’s backed by real money and can therefore be leveraged by financial systems. In my view, that’s the exciting bit and the part worth investing in.” – Varun Datta
Prediction Markets Add Money to the Equation
Forecasts about what’s likely to happen next exist everywhere. Analyst notes, economists’ predictions, and polls are all a dime a dozen. The difference with prediction markets is that money is part of the equation.
If you think the number is wrong, you can bet against it and get paid if they’re right, which gives people strong financial incentives to correct their decisions.
“Polls only tell you what people say,” Varun Datta explains. “But prediction markets tell you what people are willing to risk their money on, and that’s what banks and insurers and trading desks actually care about.”
NYSE Owner Completes $2 Bln Investment in Polymarket in March 2026
The clearest indication that Datta may be right is who is buying in. Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, completed a $2 billion investment in Polymarket in March 2026, valuing the business at around $8 billion. Meanwhile, Kalshi, the main rival, reached a $22 billion valuation in May 2026 on the back of $1.5 billion in annualised revenue.
For Datta, the identity of these investors is critical in determining the real value underlying prediction markets.
“What’s interesting about ICE is that it’s not an entertainment company or a sports betting platform. Instead, it’s in the business of selling market data and settlement services, and it builds the plumbing that moves trades around the globe.
“When a business like that writes a massive $2 billion check for a company like Polymarket, what it’s buying is a distribution channel and a data source. It needs to know how and where prices are formed.”
Products that Reveal What’s Happening
There are various other clues as to why investment funds are flowing in the directions that they are.
- Perpetual futures on crypto. In June 2026, Kalshi started listing perps, beginning with Bitcoin. Perpetual futures contracts have no expiry date, so you can hold a position for as long as you want, which is a familiar product to anyone who has traded on a crypto exchange, and a long way from a one-off bet.
- Markets on economic data. Kalshi also runs markets on official economic releases, the weather, and stock index levels. That lets a business hedge. A fund exposed to an interest rate decision, for example, can take the opposite side on Kalshi and offset the damage if the decision goes against it.
“What this means is that betting markets are about more than trying to figure out who’s going to win the next football match,” says Datta. “Instead, they provide the groundwork for sophisticated financial hedging systems that companies across various industries and verticals can use to mitigate their risks.”
The Case Against
Datta is careful not to overstate his case, and there are real reasons for caution.
Sports still make up 80% of Kalshi trading volume and 39% of Polymarket’s. Right now, most users are using these platforms in the following ways, suggesting that hedging behaviour at the institutional level is still in its infancy.
Furthermore, there are unsettled regulatory issues to deal with. The U.S. CFTC, which deals with futures markets, proposed a rule in June 2026 to assess sports contracts case by case. Courts in different states are reaching various conclusions about whether state gambling laws apply to these operations as well, complicating matters.
Datta had the following to say on this subject:
“Scale is not necessarily durable, especially in emerging and new market types. Regulations and other issues can shut them down quickly.”
“What I’m interested in is the underlying architecture that makes hedging activities by regular businesses possible. The boring markets, like inflation and interest rates, have the biggest potential upside because they provide the most valuable information to companies wanting to track and hedge against risk metrics.”
Where Truth Ventures is Investing?
Given these facts, Datta’s fund at Truth Ventures is pondering where to invest. It is more interested in the layer underneath prediction markets rather than the platforms themselves.
His view is that most betting sites have to compete on fees and marketing, whereas the underlying infrastructure inevitably compounds. For example, this layer includes:
- Oracles – the systems that feed verified real-world results back on-chain, so contracts can settle correctly.
- Clearing and settlements – making sure winners actually get paid.
- The pipes that distribute those prices to whoever wants to consume them
“People won’t necessarily remember which platform displayed the best performance in the 2026 World Cup,” according to Datta. “Instead, they’ll be more interested in the underlying technology that powered it behind the scenes.”
About Varun Datta
Varun Datta is a venture capitalist and CEO of Truth Ventures, a global Web3 venture capital firm backing early-stage companies across Web3 and decentralised technologies. With more than 15 years of experience across venture capital and emerging technologies, his investment interests include decentralised AI, blockchain infrastructure, DePIN and privacy.
Through Truth Ventures, Varun focuses on businesses developing practical technologies with the potential to support the long-term growth and adoption of Web3. He also works closely with portfolio companies, providing strategic and commercial support as they grow internationally.
