Original author: Claude, Deep Wave TechFlow

Introduction: According to a report by The New York Times on June 23, Zuckerberg has instructed his team to develop an independent prediction market application "Arena". It will initially use a points system instead of real money for betting, but has not ruled out the possibility of introducing actual funds in the future. After the news broke, the stock prices of both DraftKings and Robinhood fell. The market was worried that Meta, with its distribution advantage of 3.56 billion daily active users, would cause a dimensionality reduction blow to Polymarket and Kalshi.

Zuckerberg once again focuses on the business started by others.

According to a report by The New York Times on June 23, Meta CEO Mark Zuckerberg recently instructed a small team to develop a prediction market application, internally codenamed "Arena". The app will run independently of Facebook, Instagram, WhatsApp and Messenger, but will tap into the vast user pool of Meta-owned social platforms. CNBC later confirmed the news from sources familiar with the matter.

Two employees familiar with the matter told the New York Times that Arena is currently positioned within the company as an "experimental project, but one of the highest priority." Meta has not yet commented.

What is Meta up to?

Arena’s most striking design choice: no real money will be involved initially. Users will participate in predictions through a game-like points system, rather than placing bets with real money like Polymarket or Kalshi. But Meta has reportedly not ruled out the possibility of introducing real-money trading in the future.

The logic of this strategy is not difficult to understand. The prediction market for real money is regulated by the U.S. Commodity Futures Trading Commission (CFTC) and needs to meet a series of compliance requirements. Polymarket requires users to deposit cryptocurrencies, Kalshi requires KYC and fiat deposits, and Arena requires nothing in the initial phase. This minimizes user acquisition costs. Use the points system to develop behavioral habits first, and then decide what to do next.

Meta's distribution advantage is the core variable in this whole thing. Meta's apps have a combined daily active user base of 3.56 billion, according to data released by the company in April. This number dwarfs the user bases of Polymarket and Kalshi. Even if Arena does not involve financial transactions, just being able to introduce a small number of users into prediction market behavior patterns is enough to change the landscape of the entire industry.

Monthly trading volume in prediction markets has soared to $24 billion, and stock prices of potential rival companies have fallen in response

After the news came out, the market reacted quickly. According to CNBC, DraftKings shares fell more than 2% during the session, FanDuel parent company Flutter Entertainment also fell, and Robinhood also fell.

Over the past year, the rise of prediction market platforms has continued to erode the market share of traditional sports betting companies, and the emergence of Arena has heightened investor anxiety. Meta's own stock price was basically unaffected.

The prediction market has entered an explosive period in 2026. Kalshi and Polymarket's combined monthly trading volume surged from less than $5 billion in September 2025 to about $24 billion in April 2026, according to Pew Research Center analysis of The Block data. Bernstein estimates that prediction markets could reach $1 trillion in annual trading volume by the end of the 2020s.

The competition on this track has become fierce. Kalshi's valuation has soared to about $22 billion this year, and Polymarket is considering a new round of funding at a valuation of about $15 billion. Trading platforms such as Robinhood, Coinbase, and Interactive Brokers have also integrated event contract functions. Even Trump Media & Technology Group has announced its own plans for prediction markets.

Not the first time: Meta launched Forecast in 2020 and shut down two years later

Arena is not Meta’s first attempt at prediction markets. In 2020, Meta launched an application called Forecast, which also uses virtual points instead of real money to allow users to predict current events and trends. This product was born in the early days of the new crown epidemic. In 2022, Forecast was shut down.

Zuckerberg’s product strategy has always been this: find a proven category, copy it quickly, and then use Meta’s distribution capabilities to crush the first mover. Instagram Stories is a clone of Snapchat, Reels is a response to TikTok, and Threads is a throwback to Twitter (now X). Arena follows the same playbook.

Arena is reportedly part of a broader plan within Meta to "develop new applications based on emerging online social behaviors." With the growth of major social platforms approaching saturation, Zuckerberg is looking for new user participation scenarios. Meta is also testing a separate app called Meta Photos, which uses artificial intelligence to generate new media content.

What it means for crypto prediction markets

Arena’s threat to Polymarket deserves the crypto industry’s attention. Polymarket is built on the Polygon blockchain and is one of the most widely cited examples of real-world applications of on-chain infrastructure. A Meta product that can reach hundreds of millions of non-crypto users may divert attention and trading volume from Polymarket if it provides similar functions.

But the other side of the coin is: Meta's entry may also make the entire pie bigger. The prediction market is still a relatively niche category so far. Arena has introduced billions of users into the behavioral pattern of "betting on the outcome of events", which may in turn cultivate a potential user base for Polymarket and Kalshi.

Currently, prediction markets are also facing increasing regulatory and legal challenges. Several states have sued prediction market platforms for violating gambling laws, and a series of insider trading cases have emerged at the federal level. In April, a U.S. Special Forces soldier was indicted for allegedly using classified military operations to make more than $400,000 on Polymarket. Arena chose a points system to launch, to a certain extent, to avoid these regulatory minefields.

Arena is still in the development stage and there is no public release timetable. But considering Zuckerberg’s execution record and Meta’s resource endowment, even if the product has not yet been formed, the news alone has caused a change in market pricing.