Prediction markets like Polymarket and Kalshi have struggled to attract institutional investors despite booming popularity among retail traders. A Bloomberg analysis of Iran-related betting revealed that while over $100 million traded on Polymarket, 90% of wallets made bets of $1,000 or less, with only 0.5% placing wagers exceeding $67,000.

Institutional traders like Alon Rosin of Oppenheimer & Co. found the volumes far too small for meaningful participation. Professional traders already have access to liquid futures markets - crude oil futures alone saw $29.3 billion in volume on a single day, dwarfing prediction market activity. The Iran contracts also failed to provide useful forecasts, with odds of Ayatollah Khamenei's ouster remaining under 3% until after attacks were reported.

Despite regulatory challenges and offshore operations limiting institutional appeal, major players like Intercontinental Exchange have invested heavily in prediction markets. While retail interest grows, the Iran episode demonstrates that these platforms remain illiquid and unreliable for professional risk management. As Iain Dunning of Hudson River Trading noted, traditional futures markets still provide far superior insight into geopolitical events.