DI25014 Prediction or Gambling Apps V01 031225

 US prediction market takes on Wall Street for a share of punters’ cash

Louisa Clarence-Smith

Will President Trump meet Elon Musk again before the end of the year? Will the share price of Alphabet hit $355 before the end of 2025? Will Lando Norris win the Formula 1 drivers’ championship? Those are just a tiny sample of thousands of events that customers of Polymarket, the American prediction market platform, can place a bet on against another user.

Prediction markets have become one of the hottest sectors on Wall Street and Silicon Valley as start-up platforms such as Polymarket and Kalshi, attract millions of users and billions of dollars.

Betting on events such as elections has long been permissible in the UK, via bookmakers such as Betfair. But it was only allowed in the US after Kalshi won a legal battle with the US Commodity Futures Trading Commission last year which allowed it to offer election contracts to the public.

The ruling paved the way for US prediction markets to grow rapidly as other platforms saw the potential for the market to expand into areas such as sports events while avoiding state gambling regulations.

Since the wagers are structured as peer-to-peer trades, US providers argue they should be regulated as derivatives platforms instead of gambling companies, which means they are overseen at a federal level and avoid state regulations.

America’s booming prediction markets are being propelled by an anti-elite sentiment that favours the perceived wisdom of the crowds.

Political pollsters and Wall Street analysts are under pressure as betting sites grow in popularity and offer an insight into the likely outcome of events ranging from elections to whether a company will beat or miss earnings expectations, or whether the artificial intelligence bubble will pop next year.

Vlad Tenev, chief executive of Robinhood Markets, the Californiabased trading app, has described prediction markets as “truth machines”, while Shayne Coplan, chief executive of Polymarket, told CBS News his market was “the most accurate thing we have as mankind right now, until someone creates some sort of a super crystal ball”.

New York Stock Exchange owner Intercontinental Exchange made a $2 billion investment in Polymarket in October, aiming to use its eventdriven data to provide sentiment indicators on market topics.

Mike Ybarra, boss of PrizePicks, the fantasy sports operator that started allowing customers to make prediction market trades in November, told me he believed prediction markets could “dwarf online sports betting markets”.

He said: “Just from a pure engagement and then an audience capture standpoint, you have sports and you have everything outside of sports. You can do the weather. You can do how much a coffee’s going to be at Café Gelato two weeks from now. And so that, to me, is almost an endless opportunity, and that’s where I see it being far bigger than anything we have today.”

The continued growth of the sector will depend on the outcome of a legal battle between US state regulators and the industry.

Last week, a federal judge in Las Vegas ruled that state gaming regulators could take action against Kalshi and that it was subject to Nevada gaming rules. Kalshi is appealing against the ruling.

Ultimately, it is likely the Supreme Court will have to decide whether or not prediction markets are exempt from state regulation, Ybarra said.

Wall Street is rightfully concerned about the fast rise of prediction markets. Analysts warn that platforms growing in a regulatory blind spot blur the line between investing and gambling, putting vulnerable consumers at risk of taking on too much debt and defaulting on loans. There are fears, too, that the sector will divert capital away from long-term investing and towards betting.

Mark Goldberg, founder of Arizona-based Alternative Investments Market Intelligence, said that prediction markets “transform civic life into a betting pool and likely contribute to polarising the populace all the while adding nothing to our quality of living”. He added: “This is not market innovation. It is the financialisation of distraction.”

Louisa Clarence-Smith is US Business Editor of The Times

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