How prediction apps like Polymarket are redefining gambling

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Throughout history, radical person enactment their wealth connected the uncertain outcomes of each kinds of events.

In past Rome, for instance, radical placed wagers connected gladiator matches, chariot races, subject campaigns, oregon harvest harvests. During the 16th Century, radical stake connected who would win the Pope. In the 18th Century, London java houses were utilized for betting connected parliamentary scandals and changes successful governmental leadership. In the U.S., radical person stake connected the outcomes of statesmanlike elections since George Washington.

These are aboriginal examples of prediction markets, successful which radical commercialized contracts connected the outcomes of aboriginal events.

Prediction markets entered the modern property erstwhile the Iowa Electronic Markets (IEM) launched successful 1988 astatine the University of Iowa arsenic the archetypal online, real-money prediction market, allowing students to commercialized contracts predicting the result of that year's statesmanlike election.

Modern-day prediction marketplace apps similar Kalshi and Polymarket, which let mean individuals to wager existent wealth connected the outcomes of aboriginal events,  person catapulted rapidly into the mainstream, with regular trading volumes successful the hundreds of millions.

Due to the industry's accelerated growth, regularisation of prediction markets is lagging, and the arguable caller manufacture faces changeless scrutiny for its gray-area legality, imaginable for insider trading, and dubious power connected media and statistics.

But what precisely is simply a prediction market, and wherefore is it ineligible successful places wherever accepted gambling isn’t? Here’s everything you request to cognize astir prediction markets, lawsuit contracts, and the large players that predominate this emerging industry.

Prediction markets are exchanges for the trading of lawsuit contracts, which wage retired (or not) based connected the result of a circumstantial real-world event.

In prediction markets, these contracts are typically structured arsenic binary “yes/no” positions that settee astatine a fixed value—often $1 if the chosen result occurs and $0 if it does not—with marketplace prices reflecting the corporate probability assigned to that outcome.

In different words, if 60% of existing marketplace participants person purchased "yes" contracts connected an event, and 40% person purchased "no" contracts, a "yes" declaration mightiness commercialized astatine astir 60 cents, portion a "no" declaration mightiness commercialized astatine astir 40 cents, with each benignant of declaration paying retired $1 if close and $0 if incorrect.

As contracts adjacent resolution, spreads often widen and trading volumes thin to spike, peculiarly astir governmental and macroeconomic events—amplifying some terms find and volatility.

Related: Prediction markets similar Kalshi are monetizing world & the gaming manufacture is pushing back

Polymarket and Kalshi are wide considered the 2 starring and largest prediction marketplace platforms. While Polymarket focuses connected crypto-native, planetary access, Kalshi operates connected a federally regulated U.S. speech exemplary for lawsuit contracts.

“Despite prediction markets being little well-known than accepted polls, platforms similar Kalshi and Polymarket proved their worthy during the 2024 Presidential Election,” a survey by the Wharton School of the University of Pennsylvania said.

“Media outlets and the nationalist were antecedently unaware of the accuracy of prediction markets, adjacent though world probe had agelong supported their effectiveness.”

Prediction markets are experiencing a mainstream moment. Both CNN and CNBC person struck deals to incorporated Kalshi prediction markets into coverage, portion the Wall Street Journal’s owner, Dow Jones, is partnering with Polymarket.

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During the 83rd Golden Globe Awards connected CBS, a unrecorded ticker of Polymarket predictions for assorted awards appeared during the broadcast.

“Prediction markets burst onto the American marketplace successful the autumn of 2024, and their popularity has lone grown since,” KPMG said successful a caller probe note.

“While these markets person existed successful the U.S. for decades, their usage expanded rapidly past twelvemonth aft Kalshi, a federally regulated derivatives speech and clearinghouse, began offering contracts based connected the result of governmental events.”

The Commodity Futures Trading Commission (CFTC) nether the Biden Administration sought to prohibit specified contracts, arguing that they were akin to gaming and contrary to the nationalist interest, KPMG said, but Kalshi sued the CFTC successful tribunal and won.

“Since Kalshi’s 2024 ineligible victory, prediction markets person expanded to connection lawsuit contracts based connected crypto, climate, economics, financials, companies, and—most controversially—sports,” the steadfast said.

Due to the industry's accelerated growth, regularisation of prediction markets is lagging, and the arguable caller manufacture faces changeless scrutiny for its gray-area legality, imaginable for insider trading, and dubious power connected media and statistics.

Prediction markets are contending with insider trader concerns, which were underscored by the caller seizure of Nicolás Maduro.

An anonymous idiosyncratic connected the prediction marketplace Polymarket won implicit $400,000 by betting connected the Venezuelan President’s ouster conscionable hours earlier US forces apprehended him.

The incidental led to calls for caller legislation, similar the Public Integrity and Financial Prediction Markets Act of 2026, which aims to prohibit authorities employees from utilizing prediction markets with non-public information.

An anonymous Polymarket idiosyncratic won implicit $400,000 by betting connected the ouster of Venezuelan President Nicolás Maduro.Vargas/Getty Images

Prediction markets besides airs risks for mundane investors. Prices tin go much volatile adjacent elections oregon large information releases, arsenic these contracts tin correspond highly volatile events, according to Bedel Financial.

Retail investors tin besides endure accelerated losses if they misinterpret probabilities oregon overleverage their positions.

Regulatory uncertainty adds different furniture of risk, arsenic changes successful argumentation oregon enforcement tin abruptly restrict definite contracts oregon platforms, affecting liquidity and entree for the mean investor.

Critics assertion that politically based contracts tin distort elections. High betting prices tin pb to “bandwagon” behavior, wherever voters favour a campaigner who appears to beryllium winning, careless of the actual, underlying elector sentiment.

Detractors of prediction markets assertion that sports-based contracts whitethorn beryllium exploited to circumvent state-level gambling provisions and efficaciously marque “sports betting legal" successful each 50 states, successful summation to opening markets to bettors starting astatine a younger age.

Gaming associations, Tribal nations, and assorted States person filed lawsuits and cease-and-desist letters to support what was traditionally their domain.

While immoderate platforms run nether national derivatives oversight, authorities regulators and gaming authorities person challenged whether definite lawsuit contracts—particularly those tied to sports outcomes—functionally lucifer accepted gambling.

Trading platforms counter, claiming that lawsuit contracts autumn nether commodities and derivatives regularisation alternatively than gaming statutes.

As a result, the ineligible presumption of prediction markets tin alteration by jurisdiction, and the availability of definite contracts whitethorn alteration implicit clip depending connected regulatory mentation and tribunal rulings.

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When it comes to prediction markets, the Trump household is getting successful connected the enactment successful a large way. The president’s son, Donald Trump Jr., is an advisor to Polymarket and Kalshi, portion his task superior firm, 1789 Capital, is heavy invested successful Polymarket.

Truth Social, President Donald Trump’s societal media site, said successful October that it is readying to motorboat its ain prediction marketplace called Truth Predict done its genitor company, Trump Media & Technology Group (TMTG).

TMTG said that Truth Predict volition usage Crypto.com Derivatives North America to alteration prediction wagers, allowing users to commercialized contracts connected aboriginal events similar elections, economical data, and sports outcomes.

Below are answers to immoderate of the astir communal questions investors person astir prediction markets similar Kalshi and Polymarket.

Most prediction markets complaint fees, but the structures vary, from tiny percentages connected trades to higher commissions oregon fixed fees per contract.

"Prediction marketplace winnings are mostly taxed arsenic mean income, but immoderate CFTC-regulated platforms similar Kalshi whitethorn suffice for favorable Section 1256 superior gains treatment, making them perchance much tax-efficient than accepted sports betting" Forbes reported.

These platforms heavy trust connected marketplace makers—both quality and automated—to liquidity successful fiscal markets by quoting some a bargain terms and a merchantability terms for a security, ensuring buyers and sellers tin commercialized quickly.

This communicative was primitively published by TheStreet connected Jan 25, 2026, wherever it archetypal appeared successful the Markets section. Add TheStreet arsenic a Preferred Source by clicking here.