The World Cup has fueled a surge in the popularity of the US online prediction market. Mark Zuckerberg has made a sudden move, yet appears to be following a well-trodden path.
Reports from US media indicate that Zuckerberg has directed Meta to establish an internal project, pooling resources to develop a standalone application named Arena. This move aims to enter the recently booming online prediction market, leveraging Meta's platform scale of billions of users to compete for market share against the current dominant players, Kalshi and Polymarket.
Following the news, the stock price of Polymarket's parent company fell. Investors' concerns are well-founded; the entry of a behemoth platform with 3 billion monthly active users necessitates a reevaluation of the competitive landscape for existing players.
For those familiar with Meta's history, this strategy of imitating and replicating successful competitor products is a standard play in Zuckerberg's playbook. Time and again, he appears to wait for competitors to develop a product, validate demand, and cultivate a user base before entering the established market, leveraging massive scale to capture share.
Rapid Growth in Prediction Markets
Why is Zuckerberg building Arena? The answer lies in the immense size and rapid growth rate of the prediction market sector.
In simple terms, the logic of prediction markets transforms forecasts about future event outcomes into tradable contracts. Users place bets on questions like "Who will win a particular election?", "Will a certain team win the championship?", or "Will a company go public by a certain date?". Correct predictions yield profits, while incorrect ones result in losses.
The price of a bet reflects the market's collective judgment on the probability of an event, theoretically more accurate than polls or expert predictions because participants risk real money on their judgment, whereas polls and experts can have subjective biases.
This logic gained global mainstream media attention during the 2024 US presidential election: Polymarket's predictions for the election outcome were generally more accurate than traditional polls commissioned by outlets like CNN and The New York Times. The odds on Polymarket reflected Trump's victory weeks in advance. This event transformed prediction markets from a niche crypto product into a real-time indicator cited daily by mainstream financial media.
The sector has exploded. In 2025, the combined trading volume of Kalshi and Polymarket was nearly $40 billion, but monthly trading volume this year has already reached $24 billion, annualizing to over $200 billion. Bernstein analysts estimate the prediction market could grow into a $1 trillion annual trading volume industry by 2030.
The two companies currently dominating the market, Kalshi and Polymarket, follow two distinct paths.
Kalshi represents the compliant route. The company spent years navigating the US Commodity Futures Trading Commission (CFTC), finally gaining approval in 2021 to launch as the first US exchange legally permitted to offer event contract trading. Each sub-sector, from political events to sports betting, involves complex, lengthy regulatory processes, even litigation.
Polymarket follows a crypto-native path. The platform is built on the Polygon blockchain and settles transactions using the USDC stablecoin, thereby circumventing the US financial regulatory system. In other words, the platform operates in a legal gray area within the US and has not obtained formal regulatory approval there.
Due to its effectively illegal operation, Polymarket co-founder Shayne Coplan had his premises searched by federal investigators during the US election. Recently, the platform has been embroiled in controversy over alleged insider betting on an Iran ceasefire agreement. However, relying on blockchain, cryptocurrency technology, and a global user base, the "illegally operating" Polymarket remains one of the most liquid platforms in the industry.
During this World Cup, the compliant Kalshi enlisted Croatian star Luka Modrić for major TV advertising campaigns to attract more casual users. The non-compliant Polymarket ran borderline advertisements on the social media platform X.
Beyond these two giants, platforms like Robinhood, Interactive Brokers, and Gemini have also launched event contract products between 2025 and 2026. The entire sector is evolving from a "duopoly" towards a more fragmented competitive landscape.
Kalshi completed a $10 billion funding round last month at a $22 billion valuation and is now advancing another round expected to value it at $40 billion. In June last year, its valuation was $2 billion; by December, it had multiplied several times to $11 billion, and six months later soared to $40 billion. Kalshi executives acknowledge active IPO preparations, planning a public listing next year.
With such explosive growth, how could Zuckerberg miss out? In fact, Meta launched a crowdsourced prediction app called Forecast in 2020, but the market wasn't mature then, Meta quickly lost patience, and froze the project a year later.
Zuckerberg's Current Strategy
So, what is Zuckerberg's plan this time?
This new Arena project is a revival of the Forecast initiative, now incorporating AI features to handle question generation and outcome adjudication automatically, reducing the need for significant manual intervention. For an AI giant like Meta, the marginal cost of building a product like Arena on existing infrastructure is extremely low.
Reportedly, Arena will be a standalone app, not embedded within Facebook or Instagram. This aligns with Zuckerberg's recent preference for standalone apps, as seen with the social media platform Threads. Of course, Meta will integrate cross-platform capabilities to facilitate user acquisition from Instagram and Facebook.
More importantly, Zuckerberg aims to avoid litigation and regulatory headaches initially, seeking only to boost user engagement with a hot feature. Therefore, Arena will not involve real-money betting. This is the core distinction between Zuckerberg's approach and that of Kalshi and Polymarket. Users will receive a daily allocation of virtual currency to wager on future event outcomes, similar to a game points system, with no real financial wins or losses.
This design is clearly deliberate, given the lack of clear US regulations for online betting markets. For a giant like Meta, caution is paramount; potential violations could lead to massive fines. Advertising remains Meta's primary revenue source, so there's no rush to extract the 1-2% transaction fees that Kalshi does.
Operating with points instead of real money allows Meta to build a user base without crossing CFTC regulatory red lines, while buying time to pursue federal licensing. Once Meta secures regulatory approval, launching real-money betting would be more compliant and safer.
For similar reasons, Meta is also avoiding cryptocurrency. This choice is telling. Many recall Meta's 2019 Libra stablecoin project, where Zuckerberg aimed to create a stablecoin system backed by a basket of sovereign currency reserves, paired with a digital wallet called Calibra integrated into WhatsApp and Messenger, enabling Facebook's 2.7 billion global users to transfer money like sending text messages.
Libra's initial partner lineup was stellar: Visa, Mastercard, PayPal, Stripe, eBay, Uber, Lyft, Spotify. Twenty-eight institutions backed it, and an independent Libra Association was formed for governance. However, Zuckerberg's ambitions were swiftly quashed by regulators, as it was a borderless currency project outside central bank oversight.
Under pressure from US Congress and global regulators, partners withdrew one by one. Zuckerberg was summoned to testify before Congress, enduring a grueling five-hour questioning session. Ultimately, he retreated, abandoning the project, which was shut down and sold in 2022. That failure has kept Zuckerberg at a distance from cryptocurrency, making Arena's complete avoidance of tokens an expected move.
Of course, Arena's product design isn't the most concerning aspect for competitors. Polymarket and Kalshi have built considerable moats in liquidity, user habits, and brand recognition; a points-based imitation won't immediately destroy these advantages.
The truly alarming factor is Meta's distribution power. Facebook, Instagram, WhatsApp, Messenger—Meta's apps have a combined monthly active user base approaching 3 billion. At that scale, Meta doesn't need Arena itself to be exceptional; it just needs to place it in the feeds of enough users.
For example, when a prediction market question appears in a Facebook News Feed, when you see a friend on Instagram betting on a World Cup outcome, or when someone shares an Arena leaderboard in a WhatsApp group. The scale effect of this social propagation is infrastructure that Kalshi and Polymarket can never replicate.
Influencing Regulation and Market Dynamics
Arena's emergence will also alter the prediction market industry's landscape from another dimension: regulatory politics.
In recent years, the regulatory battles of Kalshi and Polymarket have pitted small startups against federal agencies and state governments. These fights are resource-intensive, but because the opponents are small companies, regulators can take hardline positions at relatively low political cost.
When Meta enters the arena, the situation changes. A company with a market cap exceeding $1 trillion, with dozens of dedicated congressional committees already focused on it, having fought countless battles with regulators in dozens of countries globally, will elevate the industry's political visibility to an entirely new level.
This double-edged sword is sharp on both sides: On one hand, Meta's compliance team and lobbying resources could accelerate the push for federal regulatory clarity, securing a more defined legal framework for the entire industry. On the other hand, Meta's long-accumulated negative image in Congress regarding data privacy, antitrust, and youth mental health could make regulators newly wary of a "Meta prediction market."
Returning to the initial question: Why is Zuckerberg building Arena? The current size of the online prediction market is not a strategic necessity for Meta. A $1.3 trillion annual trading volume is not a threat on the same scale for a company with over $160 billion in advertising revenue.
But Zuckerberg's competitive logic has never been purely financial arithmetic. The core user behavior in prediction markets is a pattern of high engagement and high stickiness. During events like the World Cup, it has proven itself as a real-time information source irreplaceable by mainstream media. During high-profile events, it generates user dwell time exceeding that of traditional social interactions.
This user behavior is forming a new platform habit. Zuckerberg's judgment is: rather than waiting for this habit to solidify on Kalshi or Polymarket, intervene now and use Meta's distribution advantage to pull this behavior back into its own ecosystem.
Will Arena succeed? Can a points system generate sufficient engagement, or will users find it lacks motivation without real money? Can an AI referee mechanism maintain credibility in highly contentious events? Can the regulatory path from points to real money be navigated? These questions currently have no answers.
But one thing is certain: This is Zuckerberg's Nth replication, and it won't be the last.
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