Prediction Markets: It's All Just One Big Casino
And the house always wins, baby
Happy Tuesday, and welcome back to the team’s hot takes on the news and trends floating around online. This week, our Editorial Director, Sparker, looks at creators working with prediction markets — and all the big money, and big risks, involved.
To gamble in the U.S., you have to be 21. But great news: if you’d like to blow your college fund1 before you ever vote or taste your first sip of legal alcohol, you can do that on prediction markets at the tender age of 18!
How Did We Get Here?
Prediction markets came onto the scene in the U.S. in the fall of 2024, and they’ve only grown more popular — especially since one of the biggest names in the game, Kalshi, won a lawsuit against the Commodity Futures Trading Commission (CFTC).
For the nerds, KPMG has a good breakdown:
“Since Kalshi’s 2024 legal victory, prediction markets have expanded to offer event contracts based on crypto, climate, economics, financials, companies, and—most controversially—sports.”
Polymarket, the other big name in the game, has some great examples of what exactly people are putting their money on. The answer is basically “everything”. For example, a not-insignificant number of people think that Jesus will return before GTA 6 is released.
Why is This Bad?
While adults have always been allowed to make questionable decisions with their money, there is real concern around prediction markets as a public health threat. The combination of “gambling-like design and regulatory gaps creates risks of a new behavioral addiction and democratic manipulation,” as Science put it.
If democratic manipulation seems dramatic, it’s not. The public has been keeping an eye on big trades around big political events that seem suspicious, as Business Insider reported:
“A US soldier involved in planning and carrying out Nicolás Maduro’s capture was arrested and charged with using confidential info to win bets on Polymarket related to the operation. (Kalshi, meanwhile, blocked him from trading on their platform.) He allegedly made more than $400,000.”
And it’s not just that incident that seemed suspicious; other bets around the Iran war have been flagged as well. The president seems unbothered.
This isn’t new behavior either. Polymarket got in trouble for “paying US-based social media influencers to promote election betting on the site” ahead of the 2024 election, according to Fortune, even though it was banned from operating in the U.S. at the time.
Brands Beware
These are booming markets, so it’s tempting for brands — and creators — to get in on it, but there are real ethical concerns to consider before inking any deal.
Monetizing real-world events can have completely unanticipated implications, aside from the risk of association with something as serious as insider trading. Bad partnerships break audience trust, and once that’s broken, it’s hard to rebuild.
Creators have a different calculus; depending on their niche, they can easily do an interview or bit that’s related to a prediction market that has much lower risk on their part: like this creator who “walks with top founders every week” interviewing Kalshi co-founder Tarek Mansour.
A more straightforward creator partnership is this one with competitive eater, Joey Chestnut and Kalshi:
Most of the comments discuss the bets the commenters placed (Joey wound up eating 70.5 hotdogs), but at least one pleads with their Glizzy God:
“joey i simply can not get into sports betting for you— is my heart and support not enough?”
The way the platforms work unfortunately incentivizes anyone with insider information to use it to win, like a MrBeast Editor allegedly did. That’s the real fear here, as these markets partner with more entertainment and media events; that they don’t just gamify them and make them more interactive, but actually start to influence the outcome.
It’s one thing when it’s the winner of a Golden Globe, but it’s another entirely when it’s an election.
And if you decide to play, just remember: the house always wins.
In this economy?!