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InfoFi Explosion: How Information Became Wall Street's Most Traded Asset

· 11 min read
Dora Noda
Dora Noda
Software Engineer

The financial industry just crossed a threshold most didn't see coming. In February 2026, prediction markets processed $6.32 billion in weekly volume — not from speculative gambling, but from institutional investors pricing information itself as a tradeable commodity.

Information Finance, or "InfoFi," represents the culmination of a decade-long transformation: from $4.63 billion in 2025 to a projected $176.32 billion by 2034, Web3 infrastructure has evolved prediction markets from betting platforms into what Vitalik Buterin calls "Truth Engines" — financial mechanisms that aggregate intelligence faster than traditional media or polling systems.

This isn't just about crypto speculation. ICE (Intercontinental Exchange, owner of the New York Stock Exchange) injected $2 billion into Polymarket, valuing the prediction market at $9 billion. Hedge funds and central banks now integrate prediction market data into the same terminals used for equities and derivatives. InfoFi has become financial infrastructure.

What InfoFi Actually Means​

InfoFi treats information as an asset class. Instead of consuming news passively, participants stake capital on the accuracy of claims — turning every data point into a market with discoverable price.

The mechanics work like this:

Traditional information flow: Event happens → Media reports → Analysts interpret → Markets react (days to weeks)

InfoFi information flow: Markets predict event → Capital flows to accurate forecasts → Price signals truth instantly (minutes to hours)

Prediction markets reached $5.9 billion in weekly volume by January 2026, with Kalshi capturing 66.4% market share and Polymarket backed by ICE's institutional infrastructure. AI agents now contribute over 30% of trading activity, continuously pricing geopolitical events, economic indicators, and corporate outcomes.

The result: information gets priced before it becomes news. Prediction markets identified COVID-19 severity weeks before WHO declarations, priced the 2024 U.S. election outcome more accurately than traditional polls, and forecasted central bank policy shifts ahead of official announcements.

The Polymarket vs Kalshi Battle​

Two platforms dominate the InfoFi landscape, representing fundamentally different approaches to information markets.

Kalshi: The federally regulated contender. Processed $43.1 billion in volume in 2025, with CFTC oversight providing institutional legitimacy. Trades in dollars, integrates with traditional brokerage accounts, and focuses on U.S.-compliant markets.

The regulatory framework limits market scope but attracts institutional capital. Traditional finance feels comfortable routing orders through Kalshi because it operates within existing compliance infrastructure. By February 2026, Kalshi holds 34% probability of leading 2026 volume, with 91.1% of trading concentrated in sports contracts.

Polymarket: The crypto-native challenger. Built on blockchain infrastructure, processed $33 billion in 2025 volume with significantly more diversified markets — only 39.9% from sports, the rest spanning geopolitics, economics, technology, and cultural events.

ICE's $2 billion investment changed everything. Polymarket gained access to institutional settlement infrastructure, market data distribution, and regulatory pathways previously reserved for traditional exchanges. Traders view the ICE partnership as confirmation that prediction market data will soon appear alongside Bloomberg terminals and Reuters feeds.

The competition drives innovation. Kalshi's regulatory clarity enables institutional adoption. Polymarket's crypto infrastructure enables global participation and composability. Both approaches push InfoFi toward mainstream acceptance — different paths converging on the same destination.

AI Agents as Information Traders​

AI agents don't just consume information — they trade it.

Over 30% of prediction market volume now comes from AI agents, continuously analyzing data streams, executing trades, and updating probability forecasts. These aren't simple bots following predefined rules. Modern AI agents integrate multiple data sources, identify statistical anomalies, and adjust positions based on evolving information landscapes.

The rise of AI trading creates feedback loops:

  1. AI agents process information faster than humans
  2. Trading activity produces price signals
  3. Price signals become information inputs for other agents
  4. More agents enter, increasing liquidity and accuracy

This dynamic transformed prediction markets from human speculation to algorithmic information discovery. Markets now update in real-time as AI agents continuously reprice probabilities based on news flows, social sentiment, economic indicators, and cross-market correlations.

The implications extend beyond trading. Prediction markets become "truth oracles" for smart contracts, providing verifiable, economically-backed data feeds. DeFi protocols can settle based on prediction market outcomes. DAOs can use InfoFi consensus for governance decisions. The entire Web3 stack gains access to high-quality, incentive-aligned information infrastructure.

The X Platform Crash: InfoFi's First Failure​

Not all InfoFi experiments succeed. January 2026 saw InfoFi token prices collapse after X (formerly Twitter) banned engagement-reward applications.

Projects like KAITO (dropped 18%) and COOKIE (fell 20%) built "information-as-an-asset" models rewarding users for engagement, data contribution, and content quality. The thesis: attention has value, users should capture that value through token economics.

The crash revealed a fundamental flaw: building decentralized economies on centralized platforms. When X changed terms of service, entire InfoFi ecosystems evaporated overnight. Users lost token value. Projects lost distribution. The "decentralized" information economy proved fragile against centralized platform risk.

Survivors learned the lesson. True InfoFi infrastructure requires blockchain-native distribution, not Web2 platform dependencies. Projects pivoted to decentralized social protocols (Farcaster, Lens) and on-chain data markets. The crash accelerated migration from hybrid Web2-Web3 models to fully decentralized information infrastructure.

InfoFi Beyond Prediction Markets​

Information-as-an-asset extends beyond binary predictions.

Data DAOs: Organizations that collectively own, curate, and monetize datasets. Members contribute data, validate quality, and share revenue from commercial usage. Real-World Asset tokenization reached $23 billion by mid-2025, demonstrating institutional appetite for on-chain value representation.

Decentralized Physical Infrastructure Networks (DePIN): Valued at approximately $30 billion in early 2025 with over 1,500 active projects. Individuals share spare hardware (GPU power, bandwidth, storage) and earn tokens. Information becomes tradeable compute resources.

AI Model Marketplaces: Blockchain enables verifiable model ownership and usage tracking. Creators monetize AI models through on-chain licensing, with smart contracts automating revenue distribution. Information (model weights, training data) becomes composable, tradeable infrastructure.

Credential Markets: Zero-knowledge proofs enable privacy-preserving credential verification. Users prove qualifications without revealing personal data. Verifiable credentials become tradeable assets in hiring, lending, and governance contexts.

The common thread: information transitions from free externality to priced asset. Markets discover value for previously unmonetizable data — search queries, attention metrics, expertise verification, computational resources.

Institutional Infrastructure Integration​

Wall Street's adoption of InfoFi isn't theoretical — it's operational.

ICE's $2 billion Polymarket investment provides institutional plumbing: compliance frameworks, settlement infrastructure, market data distribution, and regulatory pathways. Prediction market data now integrates into terminals used by hedge fund managers and central banks.

This integration transforms prediction markets from alternative data sources to primary intelligence infrastructure. Portfolio managers reference InfoFi probabilities alongside technical indicators. Risk management systems incorporate prediction market signals. Trading algorithms consume real-time probability updates.

The transition mirrors how Bloomberg terminals absorbed data sources over decades — starting with bond prices, expanding to news feeds, integrating social sentiment. InfoFi represents the next layer: economically-backed probability estimates for events that traditional data can't price.

Traditional finance recognizes the value proposition. Information costs decrease when markets continuously price accuracy. Hedge funds pay millions for proprietary research that prediction markets produce organically through incentive alignment. Central banks monitor public sentiment through polls that InfoFi captures in real-time probability distributions.

As the industry projects growth from $40 billion in 2025 to over $100 billion by 2027, institutional capital will continue flowing into InfoFi infrastructure — not as speculative crypto bets, but as core financial market components.

The Regulatory Challenge​

InfoFi's explosive growth attracts regulatory scrutiny.

Kalshi operates under CFTC oversight, treating prediction markets as derivatives. This framework provides clarity but limits market scope — no political elections, no "socially harmful" outcomes, no events outside regulatory jurisdiction.

Polymarket's crypto-native approach enables global markets but complicates compliance. Regulators debate whether prediction markets constitute gambling, securities offerings, or information services. Classification determines which agencies regulate, what activities are permitted, and who can participate.

The debate centers on fundamental questions:

  • Are prediction markets gambling or information discovery?
  • Do tokens representing market positions constitute securities?
  • Should platforms restrict participants by geography or accreditation?
  • How do existing financial regulations apply to decentralized information markets?

Regulatory outcomes will shape InfoFi's trajectory. Restrictive frameworks could push innovation offshore while limiting institutional participation. Balanced regulation could accelerate mainstream adoption while protecting market integrity.

Early signals suggest pragmatic approaches. Regulators recognize prediction markets' value for price discovery and risk management. The challenge: crafting frameworks that enable innovation while preventing manipulation, protecting consumers, and maintaining financial stability.

What Comes Next​

InfoFi represents more than prediction markets — it's infrastructure for the information economy.

As AI agents increasingly mediate human-computer interaction, they need trusted information sources. Blockchain provides verifiable, incentive-aligned data feeds. Prediction markets offer real-time probability distributions. The combination creates "truth infrastructure" for autonomous systems.

DeFi protocols already integrate InfoFi oracles for settlement. DAOs use prediction markets for governance. Insurance protocols price risk using on-chain probability estimates. The next phase: enterprise adoption for supply chain forecasting, market research, and strategic planning.

The $176 billion market projection by 2034 assumes incremental growth. Disruption could accelerate faster. If major financial institutions fully integrate InfoFi infrastructure, traditional polling, research, and forecasting industries face existential pressure. Why pay analysts to guess when markets continuously price probabilities?

The transition won't be smooth. Regulatory battles will intensify. Platform competition will force consolidation. Market manipulation attempts will test incentive alignment. But the fundamental thesis remains: information has value, markets discover prices, blockchain enables infrastructure.

InfoFi isn't replacing traditional finance — it's becoming traditional finance. The question isn't whether information markets reach mainstream adoption, but how quickly institutional capital recognizes the inevitable.

BlockEden.xyz provides enterprise-grade infrastructure for Web3 applications, offering reliable, high-performance RPC access across major blockchain ecosystems. Explore our services for scalable InfoFi and prediction market infrastructure.

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