---
title: "Prediction markets are booming. But is the party about to stop?"
publisher: "Stockmark.IT"
author: "Stockmark.IT Website"
published: "2026-07-05T07:16:38+00:00"
modified: "2026-07-05T07:16:38+00:00"
date: 2026-07-05
canonical: "https://stockmark.it/prediction-markets-are-booming-but-is-the-party-about-to-stop/"
category: "Business"
categories: ["Business"]
image: "https://stockmark.it/wp-content/uploads/2026/07/stencil.default-2026-07-05T081457.509.avif"
format: "news"
language: "en-GB"
---

# Prediction markets are booming. But is the party about to stop?

**Published:** July 5, 2026
**Author:** Stockmark.IT Website
**Categories:** Business
**Featured image:** ![Gold coins with currency symbols: $, €, £, ¥, falling from Stockmark.it](https://stockmark.it/wp-content/uploads/2026/07/stencil.default-2026-07-05T081457.509.avif)

---

For the devotees of America’s newest obsession, the future is no longer something to be endured, forecast or feared. It is something to be priced, traded and, if you fancy your chances, exploited. On platforms with names that sound like fintech start-ups and behave, to critics, like digital betting shops, almost any uncertainty can be turned into a contract. Not simply who wins an election or a football match, but whether a film will be panned, how cold Chicago will be on Tuesday, or how often a commentator will mention a star striker during an England game.

That boundarylessness is not an accident. It is the business model. Prediction markets such as Kalshi and Polymarket sell themselves as a new kind of exchange for “event contracts”, a marketplace in which the crowd’s shifting beliefs are rendered into a number. A “yes” contract is supposed to settle at $1 if the event occurs and $0 if it does not. If “yes” is trading at 70 cents, the market is, in effect, declaring a 70 per cent likelihood. Buy at 70 cents and you make 30 cents if you are right, lose your stake if you are wrong. It is disarmingly simple. It is also the simplicity that makes the boom feel both inevitable and faintly alarming.

Caleb Davies, a 46-year-old IT worker from Minneapolis and a father of three, is among those who have treated this new world as a second income stream, or perhaps a parallel career. He spends his spare hours on Kalshi, where he has wagered on what he cheerfully describes as “stupid” markets: the download rankings of musicians on Spotify, the reception of films by critics, the outcome of legislative fights in Congress. Davies says that in two years he has made more than half a million dollars. The money, he says, has paid for a new car, house projects and travel to 48 countries. “My wife likes the money,” he adds, with the sort of plainspoken pragmatism that is rarely found in a prospectus. “She doesn’t ask too many questions.”

Davies is not simply guessing. He has built tools, using artificial intelligence, to comb public data and steer his bets. The detail matters because it shows how prediction markets are trying to separate themselves from the romance of the punt. Their pitch is not that you will feel the thrill of the casino, but that you will participate in the discovery of truth. The more you know, the better you do. The more participants there are, the more accurate the price becomes. It is an alluring story for a country that venerates markets and mistrusts institutions.

The scale of the expansion is startling even by American standards. In June, punters placed an estimated $25 billion, roughly £19 billion, in bets on these platforms, around five times the volume in the same month a year earlier. Polymarket and Kalshi, both founded in the early 2020s, have become the emblematic winners. Their founders, young and photogenic in the way venture capitalists tend to prefer, have been turned into billionaires, or at least into people who can credibly aspire to be. The mania has the familiar soundtrack of a boom: record volumes, lavish funding rounds, and the insistence that a new asset class has arrived.

Investors have treated the trend not as a curiosity but as infrastructure. Polymarket has attracted $1.6 billion in investment from the Intercontinental Exchange, the owner of the New York Stock Exchange. Kalshi has raised $1 billion in a round led by Coatue Management, a deal that valued it at $22 billion, three times its valuation only six months earlier. Alongside the headline numbers sits another that demands attention: projected annual trading volume of $178 billion. If those forecasts are even partially realised, prediction markets are no longer a niche and no regulator can afford to look away.

Regulators, in fact, are already staring hard. The Commodity Futures Trading Commission, the American agency that polices derivatives and commodities markets, has opened a consumer protection investigation into Polymarket. Polymarket is banned in 33 countries, including Britain, Germany and France, and its recent visibility has made it an attractive target for lawmakers worried about how quickly this industry has slipped into the bloodstream of political and cultural life.

The Wall Street Journal reported that it had investigated Polymarket’s marketing tactics and alleged that TikTok creators were paid to advertise supposed winnings that were not genuine. That report prompted senators Adam Schiff and John Curtis to write to the CFTC demanding action. They argued that if prediction markets are being sold to consumers as “free money”, there is little justification for treating them as meaningfully distinct from gambling. The phrase is sharp because it punctures the industry’s preferred self-description. Gambling, the companies insist, is not what they do.

At the heart of the coming fight lies a question of classification, which is another way of asking who has power. If these platforms are derivatives exchanges, their natural overseer is the CFTC and their contracts can be framed as financial instruments. If they are gambling operations, they belong in the messier world of state-by-state rules, age restrictions and public health obligations. Kalshi and Polymarket reject the gambling label, pointing to their structure: users trade against each other rather than betting against the house, while the company takes a fee. Yet the distinction, for critics, is legalistic. In practice, they say, the consumer experience is the same: a stake placed on an outcome with the hope of profit.

The politics of regulation are complicated by who is participating. Among the major players in these markets are hedge funds, including Susquehanna, run by Jeff Yass, a billionaire and ally of Donald Trump. The presence of sophisticated money helps the platforms argue that they are legitimate marketplaces rather than parlour games. It also raises the suspicion that the informational advantage will be hoarded by professionals while ordinary users supply the liquidity, a dynamic that America has already lived through in the era of commission-free trading apps.

Campaigners fear that prediction markets represent the next stage in the gamification of life, a successor to Robinhood in which the dopamine loop is attached not just to shares but to news itself. A survey by the American Institute for Boys and Men suggests a demographic tilt that will not reassure anyone who has watched the rise of sports betting. The survey found that young men were twice as likely as the general population to bet on prediction markets or fantasy sports. It also found that most people see these contracts not as investing, with only 8 per cent choosing that description, but as gambling, with 61 per cent doing so. The age detail sharpens the debate further. Traditional gambling is often restricted to those 21 and over in the United States. Prediction markets are legal at 18, bringing a new class of speculative product into the hands of people who cannot legally place a sports bet in many jurisdictions.

Cole Wogoman, of the National Council on Problem Gambling, puts the point bluntly: regulators should either treat this as gambling or not allow it to be widely available at all. His argument is less about moral panic than about friction. The old world of casinos and even the newer world of sports betting came with barriers, physical and psychological. You had to travel, create accounts, find the venue, confront the act. Online platforms dissolve those obstacles. With less friction, more people bet. With more people betting, more people lose, and the harms that were once concentrated become diffuse and harder to manage.

American states are beginning to test how far they can go. Minnesota, Davies’s home state, has passed a law to ban prediction markets starting in August. Davies himself sounds less outraged than practical. He says he could stop, depending on enforcement, but he also notes that he could use a virtual private network to disguise his location, as many internet users already do for less adventurous reasons. Fourteen other states are considering regulation. The story of prediction markets, in other words, may come to depend on a familiar American pattern: a patchwork of rules, imperfect enforcement and a constant race between technology and jurisdiction.

The companies have tried to frame themselves not as outlaws but as innovators. Kalshi’s founding story is designed for that purpose. Tarek Mansour, a 30-year-old American-born mathematics talent who grew up in Lebanon, met Luana Lopes Lara, a 29-year-old Brazilian and former professional ballerina who also excelled in maths, when they were students at the Massachusetts Institute of Technology. They created Kalshi in 2018 after short spells at hedge funds, persuaded that ordinary people should be able to hedge or speculate on real-world events without resorting to the baroque instruments of Wall Street. Their central claim is democratic: prediction should not be reserved for professionals.

Kalshi also took a strategic decision that Polymarket did not. It spent nearly four years working in the background with the CFTC to launch as a regulated entity in 2021. Even then, the relationship turned combative. In 2023, Kalshi sued the CFTC after the regulator barred it from offering certain political bets, and Kalshi won. That victory did not merely protect a revenue stream. It helped to establish, at least for now, that political event contracts can be treated as legitimate derivatives rather than prohibited wagers.

Kalshi has also sought political friends. Last year it hired Donald Trump Jr as an adviser, doing so a week before his father returned to the presidency. Such a hire can be sold as savvy lobbying or as a warning sign, depending on your view of how Washington works. It certainly makes one thing clear: these firms understand that their survival may depend less on clever pricing than on regulatory tolerance.

Polymarket’s trajectory has been less careful and, in its own way, more emblematic of the crypto age. Shayne Coplan, a cryptocurrency enthusiast, dropped out of New York University in 2020 and started the company from his apartment at the age of 22. Polymarket gained notoriety when its odds suggested a Joe Biden victory in the 2020 presidential election, allowing supporters to claim that the crowd had seen something the pundits missed. The glamour of that moment masked a problem: the company had not secured the regulatory permissions that Kalshi pursued. In 2022 the CFTC fined Polymarket $1.4 million for operating without a licence and forced it to bar US users. Two years later federal agents raided Coplan’s home amid an inquiry into whether the platform was violating its ban, though the justice department later dropped the case.

Polymarket has since moved to make itself respectable. It began operating officially in America again last year after buying a licensed derivatives exchange. Yet its earlier posture, opening first and asking permission later, is precisely what has prompted sceptics to wonder whether the entire sector is built on regulatory arbitrage, with innovation serving as a polite word for evasion.

Britain is watching from the sidelines, partly because neither company operates here and partly because the regulatory instinct is more cautious. Still, the Financial Conduct Authority has said it will scrutinise them. That matters for two reasons. First, it signals that the UK does not intend to treat prediction markets as a foreign curiosity. Second, it hints at the possibility of a broader Western push to decide whether these contracts are financial tools, consumer products or something that deserves its own category.

Washington’s anxiety is increasingly public. In April, senators voted unanimously to ban themselves and their staff from using these platforms, a rare moment of bipartisan unity in an era of permanent tribal warfare. Chuck Schumer, the Democratic leader, offered a line that will be quoted for years if the industry collapses: Congress, he said, must not become “a casino where members representing the public can gamble on wars or economic crises or elections”. The vote came a week after a special forces soldier was caught using inside information on Polymarket to bet on the capture of Venezuela’s then president, Nicolás Maduro. It was a parable, too neat to ignore, about what happens when you allow money to chase outcomes that are shaped by human decisions and, sometimes, by secrets.

Kalshi has tried to position itself on the side of rectitude, pointing to know-your-customer rules and a policy that bars “trading by anyone who can exercise influence or control over the outcome of a contract”. The language is familiar to anyone who has read compliance manuals in finance, and it is meant to reassure regulators that the platform is alive to manipulation. Yet the problem is not only the insider who knows an outcome. It is the person who can help create it. The closer a market sits to politics, war, regulation or even sporting discipline, the harder it becomes to pretend that price is merely information rather than incentive.

Supporters insist that the incentive is the point. They argue that prediction markets produce a clearer signal than polls, pundits or cable news panels because they force participants to put money behind their beliefs. Kalshi says that 75 per cent of its traffic comes from people who are not betting at all but checking odds on politics, sport and other events. Polymarket describes itself as “real-time information infrastructure”, a phrase designed to elevate it above the realm of wagering. Even parts of the media have begun to treat these numbers as data. Dow Jones, a sister company to the owner of The Sunday Times, struck a deal with Polymarket in January to make its odds available in some publications, including The Wall Street Journal.

That is how new norms are formed. First, a behaviour is marginal. Then it is tolerated. Then it becomes, quietly, a source of information. By the time the moral debate catches up, the habit is already entrenched. The risk for regulators is that they wake up to discover that millions of people are using market prices as a substitute for reporting, analysis and civic trust, and that the companies setting the rules of this new conversation have done so without meaningful democratic oversight.

The risk for the industry is simpler: the state can still say no. Traders talk of a golden age precisely because they know it may be temporary. There is precedent for sudden euthanasia. In April 2011, the US justice department shut down major online poker sites and seized hundreds of millions of dollars in funds. An industry that had appeared to materialise overnight was dismantled almost as quickly. The lesson is not that prediction markets will inevitably suffer the same fate, but that a booming online pastime can be extinguished when law enforcement decides the social costs outweigh the political pain.

For now, the fervour continues. People like Davies will keep trawling public data, building tools, and searching for mispriced probabilities in markets that range from the consequential to the absurd. Venture capitalists will keep funding founders who promise to convert uncertainty into liquidity. And lawmakers will keep asking whether this is finance, gambling, or something more troubling: a system that invites the public to treat politics and crisis as just another asset to be traded.

Davies, who has been able to remodel his life on the proceeds of wagers most regulators have scarcely begun to understand, is honest about the mood. He calls this moment “the golden age”. It is a phrase that sounds celebratory, but it is also, in America’s markets, a way of acknowledging the usual ending: sooner or later the music stops, and the question is who is still holding risk when it does.

---

**Original URL:** https://stockmark.it/prediction-markets-are-booming-but-is-the-party-about-to-stop/
*Created by [WP Markdown Endpoint](https://wpmarkdownendpoint.com/)*