We’re in that era of gambling where gamblers aren’t restricting their bets to horses and sports teams; they’re also betting on election results, the possibility of a country launching strikes against another, and even the possible resurrection of someone who’s long been dead.
Welcome to the world of prediction markets, where people bet on a wide range of future events, allowing them to speculate on an array of real-world events — the weather, sports, the Oscars, Taylor Swift’s wedding, gold prices, and even political outcomes and military incidents.
Two of the largest and most popular prediction market platforms are Kalshi and Polymarket, whose monthly transaction volumes surged by 400% in 2025, complete with a marketing strategy targeting everyday people and with a disproportionately male userbase. In the last year, they’ve come under new scrutiny for suspicious trades, raising a host of legal and ethical red flags.
In this article, we dive into the world of prediction markets and how they work in a world that’s already topsy-turvy.
How Exactly Do Prediction Markets Work?
Prediction markets are platforms where users buy units of ‘probable events’ to profit from them when the said events happen (or don’t). Usually, users can fund their trading accounts via bank transfers, credit/debit cards, and cryptocurrency, and they may or may not be charged a platform fee. Once they’re set up, users can browse topics such as finance, culture, sports, science, and so on to find events that they want to bet on. Instead of focusing on specific areas like sports, users wager on current events, serious and frivolous.
So, you might find people betting on everything from how hot it’ll be in Rome on a given day to how many tweets a certain celebrity will send out next month. Essentially, they’re gambling sites that reward the users if their predictions are right, and the money comes from those who made incorrect predictions.
How do these platforms make money? Two of the most popular ones, Kalshi and Polymarket, have millions of users, so they generate revenue by charging fees on every bet. Plus, those users are betting billions of dollars on thousands of different markets, making it a compounding volume business. They’re particularly appealing to those who have strong opinions, follow current events, like gambling, and even those willing to trade insider information for money.
How accurate are prediction markets? Herein enters a phenomenon called “wisdom of crowds,” according to which larger groups of people are better at making predictions than individuals. The more bettors there are, the more accurate these markets are. Even industry boosters have argued that prediction markets are tools of collective intelligence, faster than the news, and more accurate than polls, with everyone benefitting from a new level of societal foresight.
Why Prediction Markets are Under Fire
Where there’s money involved, questions surrounding ethics and legality are bound to arise. Criticisers of prediction markets have an unending list of issues with the risks surrounding them, including the potential for insider trading and abuse of privileged information, the rapid spread of false news, rise in bets on violence, and promotion of irresponsible gambling.
They’re not entirely wrong, and prediction markets do have a way of turning into the Wild Wild West. For instance, a lawsuit has been filed against Gemini and Coinbase’s prediction market platforms, alleging that they’re operating as illegal gambling services. Questions also arose earlier this week with the arrest of an American soldier who made more than USD 400,000 in December 2025 on Polymarket, wagering on the United States’ military’s operations in Venezuela.
According to prosecutors, however, he not only had access to classified information but was also involved in the planning and execution of the said operation. In March 2026, an NY Times analysis of Polymarket’s data showed hundreds of bets on a specific day in June 2025 predicting that the US would strike Iran within a day. It did happen eventually, and bettors profited handsomely.
In the last few years, prediction markets have seen an uptick in the numbers of bets that came in before big events, with most of them rightly predicting whatever was about to happen. Whether people got lucky or not, it gave rise to suspicions about how these markets were operating.
An Unsolvable Problem
Besides the fact that people have been betting on everything macabre, there lies a very inherent, unsolvable problem at the heart of prediction markets: they often centre on decisions made in small, opaque rooms. Strategic operations, legislative outcomes, interest rate moves — these originate from tightly-bound processes, and don’t emerge from open systems.
Thus, the informational landscape is inherently uneven, with some people having informed perspectives before the truth becomes public. Including them introduces asymmetry, and flattening that advantage excludes those who have these informed perspectives.
So, the system can’t be both fully equal and fully inclusive.
Hence, the system is stuck in a never-ending loop of sorts: allowing insiders to trade gets you sharper prices at the cost of a moral hazard, and locking them out preserves fairness, but the market is blind to its best signals.
A Permanent Fork in the Road
According to estimates by investment firm Bernstein, prediction market volumes will surge to roughly USD 1 trillion by 2030. This seemingly overnight growth, combined with their setup as financial exchanges, makes for a mixed bag of feelings about them. After all, information asymmetry isn’t a bug in prediction markets; it’s what drives them. So, are these markets reckless speculation or a possibly useful financial innovation?
What’s the line between gambling and investing? Can our enforcement and detection systems, insider trading laws, and financial regulatory systems handle a world of events in which outcomes can be easily manipulated or are already known? Only time will tell.
As prediction markets do the balancing act, the reality is that they’re shaped by opposing forces that’ll never cancel each other out fully. So, the question isn’t whether or not they can be made flawless. It’s where society decides to draw the line between acceptable fairness and the burden of information, knowing that no matter the direction it takes, something important is being traded away.
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