There are two main reasons prediction markets have blown up in the past couple of years. One is that they offer a large group of people something they want: the chance to put money on a wide range of outcomes, from sporting events to elections to how many times Mr. Beast will say the word dollar in his next video.

The other is that, until quite recently, they weren’t really legal. Things opened up for Kalshi, which had been seeking full regulatory clearance for years, in 2024. Polymarket, which had withdrawn from the U.S. in 2022 after an enforcement action by the Commodity Futures Trading Commission, only got the go-ahead to come back last year. The first big prediction market election came in 2024, and the first fully predictified Super Bowl was the Seahawks versus the Patriots.

In January, Michael Selig, the chair of Donald Trump’s CFTC, further clarified the situation. “Under my leadership, the CFTC is charting a new course,” Selig wrote. “Prediction markets have exploded in popularity as broad swaths of market participants seek to hedge portfolio risks and test their abilities to forecast truth,” he argued, and in “order to achieve the golden age of American financial markets,” regulators must “must break with the rigid and restrictive regulatory practices of the past.” For prediction markets, and crypto, it was all systems go.

the CFTC jut released its list of new advisory committee members. really quite something— Kate Knibbs (@knibbs.bsky.social) 2026-02-12T21:47:21.265Z

the CFTC jut released its list of new advisory committee members. really quite something

Selig cites two arguments for the utility of prediction markets, each of which has contributed to their legality: (1) They’re useful for thinking about what might happen in the world, aggregating information in a unique way and outperforming polling and individual forecasters on many topics, and (2) they’re regulated financial exchanges where people trade event contracts with one another, not casinos where they engage in gaming — which helps explain why we’re talking about the CFTC here and not state gambling commissions. After all, there is no “house” in the traditional sense, and, among other differences, people can exit their positions, trading outcomes before they resolve. The latter argument also means, in legal terms, that prediction markets are available nationally to anyone over the age of 18.

By specifically referencing hedging, Selig draws a parallel between what Kalshi and Polymarket allow people to do and, say, how a farmer minimizes the risk of an unpredictable harvest by selling grain-futures contracts. (Worried that a given candidate winning an election might hurt your business? Place a hefty bet on him or her on prediction markets to balance your risk profile — so goes this argument.) In doing so, the CFTC chair sounds an awful lot like prediction-market executives, who prefer to emphasize how their field is more useful to the world than, say, DraftKings. “I just don’t really know what this has to do with gambling,” Kalshi CEO Tarek Mansour told Axios last year. “Every contract has a hedging use case, even the less obvious ones,” argued Kalshi’s Samantha Schwab — of the Schwabs — around the same time. (Schwab has since been appointed deputy chief of staff for the U.S. Treasury Department.)

As a narrow regulatory matter, these assertions now seem temporarily settled in that it’s the position of the government that Kalshi and Polymarket have nothing to do with gambling. (For lack of a better place to mention it, I’ll state here that Donald Trump Jr. is an adviser to both companies and an investor in at least one.) But the resolution of these questions arrived just as it was becoming abundantly clear — in the numbers but also to anyone who has engaged with these platforms at all or knows anyone who has — that most of the action on the big prediction platforms revolves around sports. From The Wall Street Journal:

Kalshi and Polymarket, the biggest prediction-market platforms, have attracted attention for offering outlandish bets such as whether the Trump administration will buy Greenland … But sports remain the overwhelming majority of their business, giving a sports-betting-crazed nation a new way to participate in America’s favorite new pastime.

Kalshi and Polymarket, the biggest prediction-market platforms, have attracted attention for offering outlandish bets such as whether the Trump administration will buy Greenland … But sports remain the overwhelming majority of their business, giving a sports-betting-crazed nation a new way to participate in America’s favorite new pastime.

According to Dustin Gouker of The Closing Line, the 30-day trading volume on the prediction markets shortly before the Super Bowl was about $8.4 billion, of which “$7.7 billion of that volume, or 91 percent,” involved sports. However you want to conceptualize or regulate these apps, you have to admit they’re competing with online sports gambling, which was itself widely prohibited until 2018 and is now regulated on a state-by-state basis. According to Apptopia, in January, the Kalshi app got more downloads than FanDuel and DraftKings “have ever had in a single month.” Do most of these downloaders understand themselves to be hedging against risks and enjoying the democratization of derivatives trading? Or are they trying to find a way to deal with their exposure to … the Pats losing? To Mr. Beast saying “dollar” 21 times instead of ten? The CFTC says, “Maybe!” The users themselves say, mostly, lol.

Prediction markets are, in fact, growing quickly in other areas where they could have a strange and outsize influence — politics, in contrast with sports, doesn’t really have a well-developed immune system to deal with this sort of thing. Over the next few years, though, the only barriers to the predictification of everything are lawsuits, some state-level regulations, and lobbying by the sports-betting industry, which clearly sees these platforms as direct competitors. Their fear is a strange one that’s becoming more plausible by the day: that sports betting will be swallowed whole by something that could grow much larger — and seems interchangeable to its customers — that claims not to be engaged in gambling at all.

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