Polymarket, Kalshi and others allow gamblers to bet on virtually any conceivable question about the future. Are these platforms the world’s next “truth machines”? Do they encourage addiction and insider trading? Here’s what to know.
Why have Polymarket and Kalshi risen so quickly?
“With the erosion of trust in media and institutions, it is not a wonder at all why platforms like this are exploding in popularity, people feel like the information actually reflects them and their beliefs rather than various media platforms and institutions with their own agendas”
Johnathon, LR, Pennsylvania
The 2024 presidential election was a major stepping stone for what has become known as prediction markets. Polymarket users – of which there were very few just months before – wagered $3.2 billion on the outcome of the election, with the majority of bets being placed on now-President Donald Trump winning.
The FBI searched the home of Polymarket CEO Shayne Coplan shortly after the platform correctly predicted Trump to be the winner. The search was part of a DOJ investigation into whether Polymarket intentionally allowed U.S.-based users on the platform, violating a 2022 finding that it was operating illegally as an unlicensed contract market. Polymarket called the move “obvious political retribution by the outgoing administration.” The Trump administration dropped the investigations in July.
Polymarket was not the only platform to rightly predict the outcome. Kalshi received one million new user sign-ups and boasted over $1 billion in trading volume during election night in 2024, hedging a 62% chance for Trump to win.
More recently, both platforms were correct in predicting Zohran Mamdani’s win in the 2025 New York City Mayoral race.
The idea of gambling in the US has far transcended an old-fashioned casino trip, with popular apps and websites offering the chance to gamble anywhere, anytime, and now seemingly on anything. But some states are starting to push back hard on prediction markets — Nevada, Massachusetts and other states have sued Polymarket and Kalshi on the grounds that they’re unlicensed betting operations.
A growing loss of faith in traditional polling could also be a factor in the rise of prediction markets. A report by Outward Intelligence showed that 70% of people surveyed felt that “election related polls are correct only occasionally, or not at all.” The survey also showed that 87% are concerned that pollsters intentionally spin data for their own purposes, and that 90% believed that polling leaves out or underrepresents certain groups of people.
How do prediction markets work?
Think of it as a worldwide "wisdom contest," in which people trade shares in the future.
If you have a hunch that a specific TV show will win an Emmy, you buy a "Yes" share. If it costs $0.40, the market thinks there is a 40% chance it happens; this is what’s called the “implied probability” generated by the market. If that show wins the Emmy, your share turns into $1.00. If it doesn’t, your share goes to $0.
The prediction markets, operating more like a financial market than a traditional gambling website, allows users to buy into an “event contract” by answering “yes” or “no.” Both Polymarket and Kalshi are regulated by the Commodity Futures Trading Commission (CFTC), and are allowed to operate in all 50 US states offering event-based derivative contracts.
Are they accurate?
Studies suggest prediction markets can be…
… more accurate than other forecasting techniques in certain situations. For instance, in 2023 researchers at Cambridge University found that, when a group of people bet real money on the outcome of a future event, the implied probability that emerged was more accurate than when they merely stated what they expected to happen.
When there’s little-to-no incentive to get a prediction right, people often fall victim to motivated reasoning — and that’s assuming they don’t have an incentive to lie outright about their expectations. Whereas when money is on the line, you have a clear incentive to be more honest and second-guess your instincts and assumptions.
That psychological effect is what turns prediction markets into efficient and accurate aggregators of information. If someone has information about a future event that suggests the crowd wisdom is off base (i.e. the probability currently implied by the market is too high or low), they can buy shares to move the market, which communicates their expectations to everyone else.
However, prediction markets can be less accurate in certain situations:
- When the trade volume is small. If only a handful of people have purchased shares in a market, there likely isn’t enough information feeding the implied probability to make it accurate.
- When key information is not publicly available. Sometimes an individual, company or government has an incentive to withhold details that would significantly influence a prediction market.
Some important things to keep in mind:
- The implied probabilities generated by these markets are just guesses, based on the best information available to the market participants.
- Unlikely events happen all the time. An event with a probability of 67% is pretty likely to happen, but if you look at it another way, 1 in 3 times it won’t happen — so maybe don’t bet your mortgage on it.
Prediction markets aggregate information; they can’t replace it. If there isn’t good information available about a future event, a market won’t be good at predicting it. That’s why, for example, we still need high-quality polling to have a good sense of which candidate might win an election. Otherwise, the types of data on which traders would base their bets — donation volume, social media buzz, etc. — would be unreliable and easy for candidates to manipulate. There’s still no substitute for directly asking a random sample of voters who they intend to vote for.
How should prediction markets be used in journalism and politics?
CAUTIOUS OPTIMISM: “Prediction markets can serve as a helpful counterweight to the often way-off-base predictions of pundits, which are more often designed to flatter their audience than to make the right call,” argues AllSides Product Manager Evan Wagner (Lean Left).
“Media outlets should be careful to use only high-volume markets that aren't particularly prone to manipulation, and frame implied probabilities as fundamentally uncertain, fallible and not expert-based. But they shouldn’t withhold valuable information about future expectations just because some of their audience may not interpret it correctly.”
IT’S A RISK: “Prediction markets are cosplaying as the future of news,” argues a piece from The Verge (Lean Left). “In the same way that many audiences prefer pseudo-events to events, we may discover that people prefer the ‘wisdom’ of thousands of anons attempting to predict the future to actual reporting on the current conditions around us. Seems like that’s what Polymarket and Kalshi are betting on, anyway.”
The political battle lines aren’t being drawn along the typical left-right spectrum, either.
“Conservative Mormons have aligned themselves with Las Vegas bigwigs, and MAGA royalty is siding with liberal Democrat lobbyists,” reads a piece from WIRED (Left). “Instead, One side argues that the platforms are breaking the law by operating as shadow casinos. The other insists they are just giving people access to legitimate financial markets already subject to adequate government oversight. Neither camp is backing down.”
Is gambling out of control?
“Why is everything gambling now?” Joseph, LL, Texas
Even before Kalshi and Polymarket burst onto the scene, gambling was on a meteoric rise in the US.
The Supreme Court’s 2018 ruling in Murphy v. NCAA overturned a federal ban on sports betting. Since then, 38 states and Washington DC have legalized sports betting, and gambling revenue in the US has grown tenfold. In 2025, 57% of US adults said they gambled at least once that year, according to the American Gaming Association.
“Everyone is gambling and no one is happy,” wrote macroeconomics blogger Kyla Scanlon. “When the labor market tightens and upward mobility stalls and when wealth is concentrated at the top and increasingly inaccessible, gambling feels like a rational response. When that’s the structure, people lose their sense of purpose and meaning (Victor Frankl, help) and that’s when problems develop.”
Others argue that prediction markets hold the power to overhaul government efficiency, root out fraud, and, in short, make society smarter and more honest.
“The innovation is continuous price discovery, not gambling,” argued economist Julia R. Cartwright. “Trading on private information is not a bug of prediction markets; it’s the feature. Markets work precisely because they make it profitable to reveal private information through trade… Government contracting has no equivalent mechanism: There is no continuous signal indicating whether a $300 million contract is clean or rotten.”
Jason Wingard, writing opinion for Forbes (Center bias) asserted that these markets aren’t about gambling, but rather information. “Betting markets turn belief into financial risk,” creating what Wingard called a “truth signal,” that “moves faster than polls, pundits, or official reports.” Wingard added that “when thousands of people are willing to lose money on what they think will happen, the result is a dynamic forecast of political outcomes, corporate decisions, economic trends, and cultural shifts.”
Should they be allowed?
Market contracts can carry economic value beyond speculation, particularly in areas like weather, commodities, or geopolitical risks.
Stance 2 — Ban Prediction Markets: They Enable Manipulation, Insider Trading, and Gambling
Prediction markets resemble betting platforms and pose systemic risks. Enforcement challenges raise concerns about insider trading and manipulation.
Stance 3 — Let States Decide: Prediction Markets Raise Local Regulatory Issues
States are best positioned to evaluate social impacts such as problem gambling, underage access, and competition with licensed gaming industries. Recent conflicts between state regulators and platforms illustrate how local legal frameworks shape outcomes differently across jurisdictions.
Stance 4 — Allow Them, but Under Strong Federal Regulation
Federal supervision provides consistent national rules while still allowing innovation. Because prediction markets resemble derivatives exchanges more than casinos, they may fit better under financial regulation than gaming law.
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