These new platforms aren’t technically gambling – but you can still lose millions
Billions of dollars will be on the line when Spain and Argentina take the field in tomorrow morning’s World Cup final – but not necessarily for the reasons you might expect.
Eye-watering sums have poured into prediction markets during the tournament, turning a somewhat niche activity, which considers itself trading rather than gambling, into a mainstream pastime.
While most people will watching Lionel Messi, countless others will be desperately hoping someone says Tom Cruise, or GOAT, or Lenovo. Getty Images
While most people will be sweating on the result, countless others will be desperately hoping someone says Tom Cruise, or GOAT, or Lenovo.
They’ll be hoping a goalkeeper takes a penalty, or someone scores directly from a corner, or simply waiting to see if US President Donald Trump turns up.
Shakira fans might be praying to hear Hips Don’t Lie at half-time but a bunch of anonymous internet punters stand to make some cash if she doesn’t.
While most of the big money is in relatively normal markets covered by traditional gambling firms, companies such as Kalshi and Polymarket also open the field to bets on real life, like the ones listed above.
Will Timothee Chalamet be in the stands? What will blockbuster The Odyssey’s Rotten Tomatoes score be? Will another sitting Australian MP join One Nation this year?
If you really want you can even put your hard-earned down on Trump’s next meeting with Vladimir Putin being in Australia.
US President Donald Trump claims the Iranian regime has had enough and badly wants “to settle”. Julia Demaree Nikhinson
Predictions markets have been around for years but exploded in popularity recently and World Cup fever pushed them even higher.
CNBC reported that Kalshi – which is plastered across pitchside hoardings during World Cup games – hit more than $US31 billion ($44 billion) in trading volume in June while Polymarket hit almost $US11 billion ($16 billion).
Some of the wins have been enormous, with even bigger losses – such as a bet on Belgium to beat Egypt that cost one Polymarket user nearly $US9 million ($13 million) – but experts are warning there may be even more at stake than money.
Prediction markets trade “event contracts” on the likelihood of events, such as weather, sports, politics or news.
They argue these real-time markets are a more accurate read on the future than traditional polling or punditry.
But while the big paydays naturally draw a lot of attention – and spark many of the same concerns as standard sport betting – critics argue the explosion in popularity could turn prediction markets into a threat to public health and even democracy.
Kalshi and ADI Predictstreet have been plastered across advertising hoardings. Getty Images
Concerns about political manipulation and insider trading
Prediction markets have been used as a forecasting tool under the assumption that at scale, people making financial bets on what they think will happen can predict events with some accuracy.
The markets are based on the long-accepted scientific principle of the wisdom of the crowd.
But Nizan Geslevich Packin, a law professor at Baruch College, argues the popular products have been commercialised and gamified to the point they can be considered a public health threat.
In an April article in the journal Science she argued that unregulated, large-scale participation in these markets threatens democratic integrity by allowing a space for political manipulation and creates another gambling mechanism with the power to draw people at risk of addiction.
Actor Timothee Chalamet was an excited face in the crowd as the Knicks clinched game five. Will he be there for the World Cup final? Getty Images
“PMs stand at a crossroads: Ethically designed, they could enhance decision-making; as currently deployed, they risk behavioral and democratic harms,” she wrote.
“The window for precautionary action is closing: Each week of billion-dollar PM activity, integrated into core information infrastructure without oversight comparable to that of regulated gambling, prolongs a large uncontrolled experiment on users.”
The markets have been plagued by concerns of insider trading, which are harder to police when they’re more niche or more easily controlled by one or a few people’s decisions.
UNSW Canberra PhD candidate Karoline Thomsen said “the potential for insider trading on the platform is extremely high”.
Opponents argue one person can manipulate political markets with enough money. Getty
“It’s designed to be anonymous – you don’t even need to verify your identity when creating an account,” she told The Sydney Morning Herald in March of Polymarket.
When a US Army sergeant was indicted earlier this year over bets on the capture of Venezuelan President Nicolás Maduro, he was trading on Polymarket’s international platform.
Meanwhile, on Friday, it emerged Donald Trump’s longtime teleprompter operator is accused of making tens of thousands of dollars by placing bets on more than a dozen of the US president’s speeches on Kalshi.
The Associated Press reported in April that 50 brand new accounts on Polymarket’s international platform placed substantial bets on a US-Iran ceasefire in the hours, even minutes, before Trump announced a ceasefire on social media, raising concerns of insider trading.
The capture of Venezuelan President Nicolas Maduro was the subject of bets on Polymarket - allegedly by a US Army sergeant. Eduardo Munoz/Reuters via CNN Newsource
The argument for prediction markets
Koleman Strumpf, an economics professor at Wake Forest University, is a defender of the platforms as a tool for what they were actually first designed to do: predictions.
“We can create very specific markets on very fine topics that we don’t have any other forecasts on, and this could be something about an election that’s not a very big, like a local election, it could be a very particular kind of current event, something along those lines,” he told nine.com.au.
“Usually, if you want to make a forecast, the way you know you would typically do things is you would say hire a consultant, assemble a panel of experts, do something that would be slow, costly, and at the end of the day, if you don’t do a good job picking the kind of people that you include in your forecast, it’s not going to give you anything useful.”
He argues the people who get the most benefit from the sites are not its users or even the owners but independent third-party observers who can use them to forecast or see what topics are gaining importance.
“The sort of beauty in my eyes of a site like Kalshi or Polymarket is the people on the site who run it are not necessarily experts or know a lot about almost any of these topics that they run markets on, the market kind of creates experts itself, self-selected people come to the site and sort of freely provide their information,” he said.
“ ... So to me, these forecasts are, it will be hard to replicate what these markets bring to the table in terms of their forecasting ability.”
He argues the threats to democracy are overblown because the more money one person pours in to affect the price of a specific outcome – say, a Republican candidate winning a local race – the more appealing that makes the opposite outcome for everyone else in the market.
“So, unless I, the manipulator, has kind of unlimited funds, which you typically wouldn’t, the other people in the market are going to offset what you do,” he says.
Will commentators say Lenovo? There’s a market for that. AP Photo/Stephanie Scarbrough
What’s next? ‘It’s a mess’
What most experts tend to agree on is that these markets are playing in a rapidly evolving and confusing space.
Both platforms are benefiting from a more favourable treatment of the industry in Washington.
The Trump Administration has been generally supportive of prediction markets and the CFTC has sued states to argue that federal law should preempt any regulations that state politicians have wanted to place on the prediction market industry.
The president’s son, Donald Trump Jr, is also an investor in Polymarket through his venture capital firm 1789 Capital.
Polymarket offered odds on the rescue of a crew member shot down over Iran. Polymarket
Melinda Roth, Law professor at New England Law, says there’s a lot of disagreement over whether the platforms should be regulated as sports betting or financial markets and “everybody is fighting everybody”.
“It’s a mess, so there’s almost 100 different court cases going on about the legality of prediction markets, and that includes who gets to regulate them,” she tells nine.com.au.
“And so the big arguments have been the states against either the financial platforms that are offering event contracts, or the CFTC, the Commodity Futures Trading Commission, itself has not only become involved, they’ve actually sued some of the states.
“... That’s not a typical move for them to have made.”
The president’s son, Donald Trump Jr, is also an investor in Polymarket through his venture capital firm 1789 Capital. AP
Banned for Australians but Australia not banned
When Reserve Bank Governor Michele Bullock announced May’s interest rate jump it hurt the wallets of mortgageholders across Australia.
But at the same time, anonymous people online had tens of thousands of dollars riding on a decision that may have otherwise had absolutely nothing to do with them.
It’s a strange scenario when foreigners can bet on something happening Down Under but Australians can’t.
Yet that seems to be the way things will remain since Australia’s communications watchdog termed Polymarket and other platforms an illegal gambling website last year and ordered internet providers to block it.
Of course, Australians can still use a VPN to spoof their location and get around the block: betting histories are public and many accounts have wagered on so many Australia-based sports or other markets it would be hard to imagine them being based overseas.
- Reported with Associated Press
There are many different ways to get help and information about gambling. You can visit the National Gambling Helpline or call on 1800 858 858.
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