In case you thought people were running out of ways to throw away their money, prediction markets have arrived. 

In the past year, advertisements for prediction market platforms like Polymarket and Kalshi have plastered ads on billboards across Los Angeles. These online platforms offer the ability to gamble on a virtually unlimited range of topics from “Where will Taylor Swift and Travis Kelce’s wedding occur?” to “Will Jesus Christ return before 2027?”

Polymarket and Kalshi market themselves as neutral forecasting, but it’s the worst-kept secret on Wall Street that they’re rebranded gambling markets. The resulting system pulls in young users and exposes them to addictive, high-risk markets rife with insider trading. In other words, markets that beg for regulation. 

At a basic level, prediction markets facilitate the buying and selling contracts over uncertain outcomes. Say there’s a contract for “Los Angeles Lakers win tonight.” There are two positions: “Yes” and “No,” which will add up to $1. If “Yes” trades at $0.60, the market thinks there’s a 60% chance the Lakers win. A $20 bet at that price returns $33 if the Lakers win and nothing if they lose. 

If new information becomes available — say, LeBron James twists his ankle the night before the game — traders respond by buying “No” and selling “Yes,” pushing prices down to reflect the Lakers’ lower odds. 

If this sounds like gambling, you’d be wrong according to state law. 

In California, sports betting is illegal, with platforms like DraftKings and FanDuel outlawed. However, prediction markets aren’t classified as gambling — they’re classified as derivatives. This allows Kalshi and Polymarket to bypass state laws and be regulated federally by the Commodity Futures Trading Commission — a framework designed for financial hedging, not mass consumer betting.

This is where the law starts to feel a little ridiculous. In California, it would be illegal to log on to DraftKings and bet on the Seattle Seahawks to win the Super Bowl. But it would be perfectly legal to log on to Kalshi and make a “prediction” that Seattle will win the “big game” over New England. In that case, you’re not gambling; you’re making a prediction. 

The distinction is not entirely meaningless. Sports betting traditionally involves a house: The house sets the odds, takes a cut and limits bets to manage risk, which also gives it an incentive to monitor suspicious activity. However, prediction markets operate as exchanges, matching users against each other. 

In theory, this sounds more neutral. But, in practice, it removes a layer of oversight. Without a house actively monitoring bets, markets rely more heavily on the information participants bring. This makes insider trading a real concern. 

In January, The Wall Street Journal reported a suspected insider trade on Polymarket. Hours before the United States operation to capture former Venezuelan President Nicolás Maduro, a trader put down roughly $30,000 that the U.S. would invade Venezuela and was paid out $400,000, raising concerns about nonpublic information. 

Another case unfolded with the Nobel Peace Prize. María Corina Machado’s Polymarket odds to win surged from 3.6% to 73% the night before the prize was announced. 

This imbalance of information leaves younger and less informed participants, particularly Generation Z, exposed to markets where they are disadvantaged.

Recent data from HoldCrunch suggests that a notable proportion of trading activity on Kalshi is driven by 18 to 20 year olds, young adults legally barred from gambling in most states, complimenting the rise in concern for Gen Z’s relationship with sportsbetting. 

This reflects a broader pattern of gambling among young people, with a 2025 Intuit survey claiming 37% of Gen Zers who have tried sports betting identify as addicts.   

Yet, even these concerns still leave a more fundamental ethical issue unaddressed. On Polymarket, there’s an “Iran” tab that allows users to bet on the Iran war, including contracts on how many ships Iran might strike by April 30 and previously accepted predictions for when Supreme Leader Ali Khamenei might be killed — turning geopolitical violence into speculative profit.

This is yet another regulatory failure from the federal government. If prediction markets function like gambling, they should be regulated like it.

The burden should not fall on teenagers and college students to navigate complex markets that exploit informational advantage. If prediction markets are truly financial instruments, then the CFTC needs to regulate them like it means it — by closing loopholes, enforcing insider trading rules and setting clear moral limits on the types of events that can be commodified. 

If the only way I can afford a car is by betting my life savings on how many times the president will say “discombobulator” in an hour, something has gone awry.