Prediction markets

Prediction markets: money changes everything

Advocates insist that prediction markets are not the equivalent of gambling, that they operate with a different business model. Regardless, monetizing any link in an information chain gives that link a new job: wherever money shows up, money has an opinion.

^{March 12, 2026}

A primer on prediction markets

^{Victoria Liu and Djavaneh Bierwirth, Wharton Initiative on Financial Policy and Regulation}

Crowdsourcing opinions, experiences and answers is not news to the Internet. Per Wolfers and Zitzewitz, “the power of prediction markets derives from the fact that they provide incentives for truthful revelation, they provide incentives for research and information discovery, and the market provides an algorithm for aggregating opinions.”

Despite prediction markets being less well-known than traditional polls, platforms like Kalshi and Polymarket proved their worth during the 2024 Presidential Election. Media outlets and the public were previously unaware of the accuracy of prediction markets, even though academic research had long supported their effectiveness.

Let’s look at how these prediction markets work in terms of their components as well as their implications for the finance industry.

^{Jan. 23, 2025}

Prediction markets and the economics of belief

^{Richard Warr (N.C. State University)}

Prediction markets are all over the news. They often resemble gambling or speculation in that they allow participants to bet on an almost unimaginable range of events, from who will win the Super Bowl to what the weather will be like in London next month. But these markets do more than entertain or speculate, they aggregate information and produce forecasts that are frequently far superior to those generated by opinion polls or experts.

^{Feb. 6, 2026}

Prediction Markets: Policy Issues for Congress

^{Congressional Research Service}

Prediction markets are exchange platforms that specialize in offering event contracts. Event contracts refer to contracts with a binary payoff structure tied to the occurrence or non-occurrence of a specific event. Users purchase and sell these event contracts, continuously establishing prices. The price of event contracts may offer informational value on the probability of a given event occurring. Event contracts have been regulated by the Commodity Futures Trading Commission (CFTC) and have traditionally been constrained in their scope and volume. Recent changes driven by litigation and the CFTC’s regulatory posture have led to the rapid expansion of consumer-facing CFTC-regulated event contracts from markets like economic indicators and weather, into politics and sports. This issue has sparked certain jurisdictional issues. Specifically, the question of whether sports-specific markets conflict with state-level gambling laws and national laws governing gaming on tribal lands is currently being litigated and has led some stakeholders and observers to question whether such markets are more similar to and should be regulated as traditional derivatives markets (specifically, swaps), gambling, or some combination of the two. The popularity, regulation, and range of prediction markets introduce various policy issues including regulatory arbitrage and insider trading.

^{March 20, 2026}

Prediction Markets and Insider Trading Law

^{Congressional Research Service}

The past two years have witnessed the dramatic growth of prediction markets—i.e., online platforms that allow users to buy or sell contracts with payoffs tied to the occurrence or nonoccurrence of specific events, such as sporting event outcomes, political election results, and macroeconomic or geopolitical developments. Highly publicized instances of large, well-timed bets on prediction markets have generated interest in whether and how insider trading law applies to such markets. This Legal Sidebar provides an overview of these issues. It is divided into three parts. First, the Sidebar offers background on prediction markets and insider trading law. Next, it discusses a February 2026 advisory from the Commodity Futures Trading Commission (CFTC) addressing insider trading on prediction markets. The Sidebar concludes by discussing considerations for Congress.

^{April 3, 2026}