The online casino and sports betting market in the US is still relatively new, which makes it a perfect location for innovation. Customers have not yet settled in with a favorite brand just yet, which makes market disruption that much easier. While every company wants to promote that iconic, flagship product as part of player acquisition efforts, it seems that the disruption this time has come from outside the industry. Well, kind of.
According to the Commodity Futures Trading Commission (CFTC) in the US, prediction markets are not gambling. They are financial contracts, where players can wager on the outcome of different events. While there has already been plenty of discourse around the semantics of prediction markets, as well as gambling regulators taking legal action against them, it is also worth mentioning the social concerns around the platforms.
Problematic markets
As the name may suggest, traditional sportsbooks tend to stick to offering wagers on sports, with some of them branching out to reality TV and politics in recent years. However, prediction markets pride themselves on being able to offer anything and everything.
At the time of writing, Polymarket's homepage is home to markets on the next Republican presidential nominee ($134m volume), the Super Bowl champion ($632m) and the pending Netflix-Warner Bros acquisition ($238k).
Yet, on a darker note, it also offers markets for potential dates for conflict between the US and Venezuela ($43m), Israel striking Lebanon on Christmas Eve ($9m) and several dozen on the Epstein files ($13m+).
This is nothing new for Polymarket. In 2023, the company made headlines when the platform was accepting bets on the missing Titan submersible and its missing crew. Some of the bets regarded whether the crew would be found alive, or whether they would even be found at all. All five members of the crew were killed in the implosion, with the youngest being only 19.
The platform has also been criticized for holding markets on the Ukrainian war. Polymarket is banned in several countries, including Switzerland, France, Poland, Singapore and Belgium.
Other prediction-market operators, like Kalshi, may not currently offer markets quite as scandalous as Polymarket's, but there remain sensitive topics that are just as open to manipulation and fraud. Some of the markets on Kalshi's home page at the time of writing include "Who will be elected President of Honduras?", "What will the announcers say during the California at Hawai'i college football game?" and the price of crypto.
Political interference
Prediction markets are no stranger to political controversy, either. Polymarket faced enforcement actions in 2024, before the Trump administration relaxed regulations for these companies. Trump Jr would be appointed as a strategic advisor to both Kalshi and Polymarket around the time that the CFTC dropped its investigations into the prediction markets. Trump Jr's venture capital firm, 1789 Capital, invested in Polymarket.
After his appointment to Kalshi, Trump Jr admitted on Twitter that Kalshi knew the election results "hours ahead" of mainstream media.
Later, Crypto.com donated $11m to Trump committees. Within weeks, the Securities and Exchange Commission closed a year-long investigation into the company. Crypto.com then poured $1bn in assets to launch the 'Truth Predict' market on Trump's dedicated social media platform. Devin Nunes, Chairman and CEO of Trump Media, said: "For too long, global elites have closely controlled these markets - with Truth Predict, we're democratising information and empowering everyday Americans to harness the wisdom of the crowd, turning free speech into actionable foresight."
Policies for profit
In 2001, the US Defense Advanced Research Projects Agency (DARPA) released a futures exchange market called the Policy Analysis Market (PAM). PAM was developed in May to become a "market in the future of the Middle East," which was coincidental, because the war on terror was launched four months later on 14 September.
However, the project was pulled in 2003 following a particularly disastrous press conference that saw several US senators discussing just what PAM would be used for. According to screenshots of the website, the markets available included coups d'états, assassinations, and terrorist attacks. Perhaps most notable was the market on the assassination of Yasser Arafat, the Chairman of the Palestine Liberation Organisation and the President of Palestine.
A few years later, Intrade became the next big US-based prediction market. This platform encouraged users to wager on the same markets we see in Kalshi and Polymarket today, but also reportedly also allowed users to bet on the capture of Osama bin Laden and the bombing of Iran. In 2013, Intrade closed, citing "financial irregularities."
Potential for change
As with anything, no group is a monolith. Even within a homogenous group, you will find great diversity in thought and practice. Just because there have been problematic prediction markets in the past, or elsewhere in the market currently, that does not mean that all prediction markets will inherently operate in these manners.
As gambling behemoths such as DraftKings and FanDuel begin to launch their own prediction market platforms across the US, they have the chance to prove the dissenters wrong. Other, less savoury prediction markets have provided them with an opportunity to shine brighter than the rest. Whether this will be worth forfeiting several gambling licenses over remains yet to be seen, but these may yet herald a change in the sector.
Prediction markets date back to at least the 1500s, when people would wager on who would be the next pope
