The truth is that prediction markets have become an inevitable part of the gambling discourse. We are continuously hearing about these platforms, how they reflect public sentiment, and why we should consider their probabilities as indicators.
In fact, they are a spawn of the blockchain reliance that we see more and more of. Depending on your stance on decentralized banking, this can be a good or a bad thing.
Prediction markets blend the blockchain’s ascension with an increased public interest in gambling, which is yet another dilemma of our times. Has gambling become simply inextricable, or is it just a trend that may not survive the passing of generations?
These are questions for the future. Right now, we focus on what we have in front of us: prediction markets with a roaring ascension. They’ve become so popular that evaluations have skyrocketed, which has raised concerns about a possible prediction market bubble.
What has led us, as a society, toward this attraction to prediction market models? One of the answers is the familiarity provided by the legalization and rise of online gambling. BetBrain.com reports a significant influx into the competitive field of iGaming, and prediction markets are essentially going for a part of the pie.
This article will explain prediction markets and discuss why they’re mostly a competitor to traditional sports betting.
Defining and explaining prediction markets
Prediction markets are digital platforms that aggregate smart contracts between users. Gambling is their central premise. These markets are questions with multiple answers and solutions.
You can choose to buy stock in one of the options at its current evaluation. In most cases, the market is an upcoming event, and the answers are possible outcomes.
If the result is the one that you picked and bought stock for, your investment rises in value, and the market reaches its resolution. If you choose the wrong outcome, your stocks lose their value instantly.
These prediction markets operate within the blockchain, and each entry is hosted by another user. Theoretically, you can make predictions and invest in anything with multiple possible results. It’s a phenomenon that has gained traction with many other events other than sports.
Politics has been one of the biggest subjects that has attracted predictions, but also mediatic attention. Sports have been somewhat secondary until recently. There is already a betting industry that is competing with this prediction market style, which blurs regulatory lines and brings a more fluid model.
Why do they captivate the gambling world?
Prediction markets have quite a few things going for them. They operate on the blockchain, which has made them particularly attractive to those who believe in decentralized financial solutions. It’s also a peer-to-peer system that enhances fluidity.
One of the primary benefits is simplicity. You hop onto one of the two leading platforms (Kalshi and Polymarket) or on another similar site. You search for or find a market that you find interesting, and buy stocks for one of the options. Markets with only two answers are prevalent, which further simplifies the model.
The payout part is also accessible. Usually, winning stocks reach a benchmark per unit, which is generally, $1 (or its equivalent). If you’re right, you know what your potential payout can generate.
Another note is the marketing effort created by these prediction market platforms. Social media engagement, natural and manufactured, has brought immense attention to these sites, which has attracted numerous users.
Overall, the jury is still out as far as sustainability goes. For this reason, their societal impact is something we’ve yet to truly assess when their role crystallizes.
Prediction markets are closer to trading than traditional betting
Traditional betting, as we know it, is a humongous industry that has been steadily expanding ever since online gambling became legal following the Murphy v. NCAA Supreme Court ruling in the USA.
Naturally, this industry has had a firm footing on the global stage way before the 2018 decision. However, the American market is massive and definitely influential. Both Polymarket and Kalshi come from the American market, operating with CFTC licenses for trading and having their corporate headquarters in New York City.
As you may know, the breaking point regarding differences from traditional sports betting is the difference between odds and probabilities.
- Odds, as used by standard betting platforms, are assessments that include a bookmaker’s perspective. They’re the results of major calculations based on historical results and current context. These odds shift occasionally before the outcome itself, and that includes an assessment of market sentiment. The bookmaker is the only entity that sets the odds.
- Probabilities showcased in prediction markets are what inform the valuation of outcome stocks. Context may be shifting, but the volume and movement of stocks are what change the probabilities showcased by a market. In short, these probabilities reflect market sentiment.
However, issues like insider trading have plagued both sports betting and prediction market models.
For the latter, massive stock acquisitions for political outcomes have been cited as a major concern. Such an artificial change of the displayed probabilities is a disingenuous reflection of public sentiment, which can be a method of influence undecided voters.
The blockchain set the stage.
The blockchain is crucial to the prediction market style because it allows the peer-to-peer methodology. Users can create markets and buy stock in numerous outcomes because of it. As such, it’s an environment that can either be unfamiliar or positively revolutionary.
The payments that fuel these smart contracts are somewhat simple, but not as easily accessible as those made available by traditional betting.
Polymarket operates specifically with one cryptocurrency, namely USDT. This is a so-called stablecoin because it’s pegged to the value of the USD. As such, you are trading with a crypto avatar of the USD, which retains the blockchain connection with a simple value benchmark.
On the other hand, Kalshi trades exclusively with USD. You can fuel your wallet with various methods as well.
Are regulations yet to catch up?
For now, it would appear that the prediction market industry is relatively safe in the USA, which is its primary market.
Polymarket had an initial issue with the CFTC, receiving a $1.4 million fine from the Commission due to perceived regulatory violations in January 2022. From that point up until the end of 2025, the platform couldn’t legally provide its services to American customers.
However, an investigation into its operators that started in July 2025 made it possible for the company to return to the USA market, thanks to a conclusive regulatory relaxation. This is in stark contrast with markets like France, Switzerland, and Singapore (among others).
The next step in this regulatory saga is in close tie to Polymarket’s rival. Kalshi went through similar conflicts with the CFTC starting in 2022.
However, the big problems began in the state of Massachusetts, which led to a lawsuit in 2025 by the state’s Attorney General. In January 2026, an initial ruling led to state-wide geofencing that would bar Kalshi from operating in Massachusetts.
This outcome is more interesting because the state of Nevada used this preliminary outcome to argue that Polymarket should not provide such gambling without a state license. As of February 2026, we’ve yet to see bigger reactions and regulatory movement.
Conclusions and the issue of responsible gambling
Naturally, the online gambling industry operates within standards-based environments. This means that having a license also means placing a strong focus on responsible gambling, which is not something that we truly see in the context of prediction markets.
They may be gambling, but their status as traders rather than typical betting platforms gives them the leeway not to focus on safety and responsibility. There is a formulaic mention of risk in the footer of each platform, but a lack of formality that we typically see from betting sites and apps from licensed operators.
As such, if you opt to engage in prediction market gambling, please do so responsibly!
