Kalshi and Polymarket Are Worried About Their Reputations

"The prediction-market industry has a lot of reasons to be optimistic right now. It's growing extremely quickly, multiplying many times in size since last year by drawing in new users. Kalshi just raised another billion, and its valuation is skyrocketing. Prediction-market data is incorporated into tools like Google Finance and frequently included in media reporting, and major financial institutions want into the game, too. And despite plenty of negative press and social-media attention around insider-trading allegations, companies like Kalshi are operating in an incredibly friendly federal regulatory environment compared to a couple of years ago."

"Sure, it's true that president and former casino owner Donald Trump said, in response to questions about prediction-market trades around the war in Iran, that "the whole world, unfortunately, has become somewhat of a casino," concluding that "it is what it is." It's also true that his son Donald Jr. has advised both Kalshi and Polymarket and that his social-media platform, Truth Social, announced late last year that users will soon be able to "trade prediction contracts related to major events and milestones, such as political elections, interest and inflation rate changes, commodity prices on gold and crude oil, events across all major sports leagues, and more using the new product technology called 'Truth Predict.'""

"The Trump administration's orientation toward prediction markets is most evident in the actions of its Commodity Futures Trading Commission, which is led by sympathetic libertarian Michael Selig, who has promised to "achieve the golden age of American financial markets" and characterized users of platforms like Kalshi and Polymarket - who, it should be noted, trade on sports outcomes in far higher volumes than anything else - as "market participants [who] seek to hedge portfolio"

Prediction-market activity is expanding rapidly, attracting new users and large investments, with major platforms gaining high valuations. Prediction-market pricing is increasingly integrated into mainstream financial tools and media coverage, while large financial institutions show interest in participating. Federal regulatory conditions have become more supportive than in prior years, including actions by the Commodity Futures Trading Commission under leadership described as sympathetic to prediction markets. Despite this favorable environment, prediction-market companies are under pressure due to negative publicity and insider-trading allegations. Political figures have also commented on prediction markets, and related platforms have announced plans to enable trading prediction contracts on major events and milestones.

Read at Intelligencer