A brief history of forecasting the market: From court gambling to blockchain

Forecasting a brief history of the market: From court betting to blockchain

Forecasting the future has never been easy. Polls can go wrong, and experts have their own prejudices. This is why we need to take a closer look at the history of forecast markets today.

This activity, which started with informal bets, gradually evolved into a tool that approximates true predictions. This article will review its evolution, explore its turning points, and explain why blockchain oracles like Chainlink are now part of the story.

What exactly is the forecast market?

People trade on the outcome of a future event. Buy a share and get a reward if the forecast is correct. It's simple in theory.

Prices at these venues change in real time, reflecting what a large group of people jointly believe will happen. This is why the term "market-based forecast" comes up frequently. It is the foundation of all development in the entire field.

Unlike ordinary polls, this mechanism directly rewards accuracy. People who do their homework often win more, which brings prices closer to the truth over time.

How long is its history?

To understand the origin of all this, you have to go back into the past longer than most people imagine. It is not a modern invention of wearing new technology, far from it.

Pope Election Gambling (1503 - 1591)

The earliest recorded chapter in the history of prediction markets dates back to the papal election in Rome during the Renaissance. Based on a study of more than 500 years of papal secret gambling, betting on new papal elections had become an established practice by the early 16th century and is widely regarded as one of the earliest recorded examples of gambling on election results.

Because the papal conclave is held in complete secrecy, official results will not be announced until the traditional white smoke signal indicates that a new Pope has been elected. This uncertainty makes these bets particularly attractive, with participants relying on political connections, rumors and informed speculation rather than confirmed information.

Even in that era, people tried to price uncertainty. Despite earth-shaking changes in technology, the core concepts behind the prediction market have remained surprisingly consistent over centuries.

Election odds before polls (1868 - 1940)

Long before scientific polls became popular, election gambling had become one of the most reliable prediction tools in the United States. According to research published by the American Economic Association in the Journal of Economic Prospects, gambling markets that worked well between 1868 and 1940 performed well in predicting presidential election outcomes before the era of scientific polls.

These markets do not ask voters who they intend to support, but reflect what participants collectively believe will happen. Newspapers at the time would regularly publish gambling odds, viewing them as an important indicator of public expectations, rather than just a form of gambling.

Research that made it academic (1988)

In 1988, the Iowa Electronic Markets (IEM) transformed forecasting markets from an interesting concept into a serious academic research project. According to researchers at the University of Iowa, the IEM has become one of the longest-running real money prediction markets in the world and continues to prove that market prices can accurately predict election outcomes.

Later research compared the Iowa electronics market to hundreds of polls and found that the market is generally more accurate than traditional polls, especially when predicting election results in advance. This evidence has earned academic credibility for forecasting markets and encouraged researchers and universities to study it as a practical forecasting tool, rather than just a form of gambling.

Brief timeline

Period: 1503 - 1591 Milestones: Pope's Conclave Importance of gambling: The earliest known case of betting on closed results

Period: 1868 - 1940 Milestones: Election gambling before polls Importance: Becoming a major election prediction tool in the United States

Period: 1988 Milestone: Importance of Iowa Electronics Markets: Proving that trading prices can predict results

Period: 2020 Milestone: Kalshi and CFTC Regulatory Importance: Opening up a regulated path in the United States

Period: 2025 Milestone: Importance of Polymarket and Chainlink Cooperation: Bringing on-chain settlement to trading platforms

Period: 2026 Milestone: The importance of trading volume exceeding US$40 billion: This field has entered mainstream vision

When regulators finally opened the door

For decades, such activities have remained in a legal gray area in most countries. That changed in 2020, when Kalshi received official designation from the CFTC, the main U.S. derivatives regulator. This designation gives Kalshi the right to provide regulated event contracts. Arguably, this is one of the clearest turning points in the regulated forecast market in U.S. history. Traders can finally use a supervised, legal structure rather than informal or offshore alternatives.

It also had some less obvious effects: it gave institutions and journalists more confidence to cite these prices as real forecasting tools, rather than just out of curiosity.

Then came cryptocurrencies

The next real transformation comes from blockchain. To be honest, the rise of the blockchain prediction market has solved a problem that has plagued these platforms for years: Who determines the outcome? Can this decision be trusted?

In September 2025, Polymarket announced a partnership with Chainlink. According to an official announcement, this collaboration integrates Chainlink's data standards into Polymarket's decision process. Its stated goal is first to achieve faster and more accurate settlement of asset pricing contracts, and plans to launch more categories in the future.

Summarize the Polymarket-Chainlink collaboration in a simple statement: no longer relies on social voting or manual inspection of results, results are now confirmed through verifiable, tamper-proof data.

The technology behind it, explained in popular language

Before going further, a few terms are worth explaining:

Decentralized oracle network: A system that can securely introduce real-world data (such as asset prices) into the blockchain without relying on a single company to guarantee it.

Chainlink Data Stream: A way to transfer low-latency, verifiable price data directly to smart contracts.

Chainlink Automation: A tool that automatically triggers on-chain operations, such as settling contracts immediately after receiving correct data.

By combining these tools, real-time data parsing can be achieved. Contracts can be closed and paid almost immediately, rather than waiting for manual signing. This also reduces controversy because the underlying data is verifiable rather than subjective opinion.

The numbers behind the surge in 2026

According to data from Chainlink Labs, market adoption rates are forecast to accelerate rapidly in 2026, with total monthly transaction volume exceeding US$40 billion, compared with approximately US$1.2 billion in 2025. This scale illustrates some problems. Cryptocurrency betting platforms are no longer marginal experiments. They are being used alongside traditional prediction tools such as polls and expert reviews.

Advantages of this model

Gather the opinions of a large number of people to form a constantly changing price. The on-chain version provides transparent and verifiable settlement. Reactions to breaking news far exceed surveys based on polls. Regulated venues, including Kalshi, add legal clarity to traders. Oracle based analysis reduces manual judgment.

Its remaining shortcomings

This area is not perfect. Smaller, niche contracts may lack liquidity, which can distort prices and mislead ordinary traders. Subjective issues and asset pricing are different in nature. They are even more difficult to solve using oracle data alone. Regulatory treatment still varies widely among different countries, which limits access in certain regions. In addition, you need to worry about manipulation. On low-volume contracts, it is not unimaginable for a small group of traders to push prices in one direction. Reliable oracle data certainly helps, but it does not completely solve problems in markets that are based on opinions rather than facts.

Why all this matters today

Looking back at the entire timeline, you can understand why so many institutions are paying close attention now. Reporters quoted real-time prices during the election. Analysts compared it with traditional polls. Even policymakers mention them when discussing public perceptions of major events.

This trust did not happen overnight. It was slowly established through centuries of informal gambling, decades of academic research, and ultimately regulation and verifiable on-chain clearing. Each stage adds credibility to the previous stage.

What happens next?

The next chapter may focus on the analysis of subjective events. Chainlink and Polymarket both say in their own ways that deterministic contracts like asset prices are just the starting point. Both companies have expressed interest in expanding oracle based analysis to more complex, opinion-based questions in the future.

Future development may depend on how this issue is resolved and whether regulatory clarity continues to improve in major economies such as the United States.

Last words

This didn't start with cryptocurrency, far from it. It started with simple bets on real-world outcomes, centuries before anyone had ever heard of blockchain.

What has really changed is the underlying infrastructure: closed bets have given way to academic verification, which has given way to regulated contracts, and now real-time settlement results from a decentralized oracle network. The core concept has never really changed. What has changed is trust, speed and transparency in the way these outcomes are determined.