There is a lot of doomerism in the media around the rapid rise of prediction markets: “Prediction Markets and the ‘Suckerification’ Crisis,” “America Is Slow-Walking Into a Polymarket Disaster,” “The Company Making a Mockery of State Gambling Bans.”
But people have always placed bets on notable events—think March Madness, the Super Bowl, or even presidential elections. What makes today’s platforms different is that they have a constantly changing odds market fed by information, breaking news, and people able to trade on it.
On platforms such as Kalshi, Polymarket, or PredictIt, prices range from $0 to $1 and mirror the market’s probability: 60 cents corresponds to a 60 percent chance that an outcome will be realized, and the odds update in real time as new information arrives. The beauty of it all is that local and expert implied-knowledge is rapidly converted into a publicly accessible forecast. When the event “resolves,” the winning contract pays out.
Much has been said about the ethical quandaries posed by prediction markets (death markets) (war markets), but the underlying fact remains: Markets work specifically because there is innate value attached to privately held information, realized through public trading.
All functioning systems hinge on their incentives, and not everyone sees this peer-to-peer trading as part of a social or financial apocalypse.
A 2012 working paper by economists Erik Snowberg, Justin Wolfers, and Eric Zitzewitz finds a utility for these markets to “test particular economic models, and use these models to improve economic forecasts.” A study published by the Federal Reserve in February 2026 examined market-related forecasts and found that these markets “provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.”
As analyst and statistics professor Harry Crane has stated on his excellent Substack, “Prediction markets offer two primary benefits: (1) hedging event-driven risk and (2) information aggregation for public consumption.”
Here are two non-controversial examples:
Who wins the 2026 Oscar for Best Actor?
(It was Michael B. Jordan of “Sinners”)
How long will the government shutdown last?
Placing stakes on actors winning awards seems more like pure recreational speculation, but following price signals related to a government shutdown has real downstream effects for the broader economy. If there are traders with special insight into negotiations within Congress, it’s more useful to the public than a televised hearing on C-SPAN to know where things are trending.
On entertainment, it’s worth noting that Kalshi’s market forecasts were accurate on nearly 80% of the Oscar markets, correctly predicting the winners in 19 of the 24 categories. Actors and films are attached to studios, and studios are attached to publicly traded stocks (NFLX, DIS, CMCSA, WBD, and PARA). Wins on the Oscar stage send signals through the whole system.
This is, in a real sense, a public benefit. So let’s review some others.
Upside #1: Government waste, fraud & abuse could be rooted out
Traditional tools for government accountability (inspector general offices, DOJ enforcement, and whistleblower actions) uncover only a sliver of the total fraud occurring in federal agencies and programs. Hundreds of billions of taxpayer dollars are lost every year due to these limitations, but prediction markets offer a new set of possibilities for combating fraud.
There are three actions that lawmakers could take here: First, contracts, grants, and major spending programs above a certain size would have to be listed in a public database that shows the contract number, the award amount, the payments, and any later changes to contracts. Then, Congress would have to allow prediction markets to offer contracts on whether those public deals are eventually found to involve fraud, overbilling, or serious misrepresentation, without classifying that trading as gambling. Finally, a small portion of each contract should be reserved as a fraud bounty, giving market participants a financial incentive to identify misconduct.
People within the system, observing it, could send price signals about what’s going on inside agencies, dispersing knowledge in ways that audits simply can’t. Markets could pay out after DOJ investigators confirm fraud above a certain level.
As Julia Cartwright of the American Institute for Economic Research said of the issue in the Washington Post, “Fraud persists in government not because people don’t know where it is but because knowing is not enough. Markets succeed where bureaucracy fails because they reward being right early and punish being wrong loudly. If we are serious about stopping fraud at scale, we should stop pretending audits and whistleblowers alone can do what prices were invented to do.”
Upside #2: Better news and public information flow
The incentive of online media for atleast 15 years has been “clicks, clicks clicks.”. A site hosts ads; ads require eyeballs, and so the natural outcome is content mills dressed up as legitimate news, which live or die based on web traffic. Clickbait was born and took over the Internet.
There is a better way. As Tarek Mansour of Kalshi recently said, “The incentive structure for a prediction market is truth—it is more volume, more liquidity, which translates to better forecasts.”
We can learn a lot of basic economic information through prediction markets. In the words of Jim Harper at the American Enterprise Institute, “Prediction markets seem to be the internet descendant of three things: gambling, investing, and journalism.”
Just like the future price of oil tells us something about the fate of our summer vacations or whether you can afford to fill up the tank before a big road trip, these markets also provide plenty of information useful to rudimentary decision-making.
Whether the Federal Reserve will cut rates can affect a lot about your business or your credit situation if you’re thinking of buying a house. Rather than trying to read the analysis of hundreds of different opinion markets, what if you could just view probability through a transparent pricing market? That’s a huge benefit.
Of course, these markets are made up of thousands of different guesses, but they’re guesses tied to real capital and real stakes, ideally with people who have more of a clue or stake in the outcome than you do. The subjective value of these predictions, cobbled together into a clear pricing model, offers an objective value you can judge as either true or appearing closer to true.
Upside #3: Knowing the “mood” in the room
Something tricky about prediction markets is that they make explicit what traditional stock trading suggests by way of implication. Buying oil futures at any moment is an indirect bet on whether war will break out in key regions, just as buying stocks or options in certain companies can be a way of trading on the economic effects of conflict.
Any informed trader investing in TSMC (Taiwan Semiconductor Manufacturing Company) is likely doing so on the assumption that an armed conflict with China is not imminent. CCL (Carnival Cruise Lines) took a 43% plunge between 2022 and 2023, because almost 7% of their passengers hail from Russia or Ukraine. Markets, war and peace are intertwined, and stock trades are proxy statements about the likelihood of drama on the world stage.
Prediction markets cut out the by-proxy element and help the world see more transparently what major events could be on the horizon. They also reflect consumer confidence in market stability, which major firms have always used to calibrate their investments.
Polymarket had, for a long time, a market titled “Nuclear weapon detonation by…?”—which had drawn in over $838,000 in volume and showed a 22% probability of nuclear conflict by year’s end. The easy criticism is that people are profiting off a nuclear attack; the more complex analysis is that we should want to know how people are feeling about global stability. Every futures market rests on this.
Hedge funds clearly think in those terms, asking which assets would perform best if war becomes more likely. The $529 million traded in Polymarket’s Iran-strike markets was small compared with the far larger sums moving through oil futures and defense stocks over the same period. The main difference is that prediction markets make the event itself explicit. That is both their value and the reason they attract so much scrutiny.
Going forward, our society will establish clearer guardrails for how we want these markets structured and governed. The CTFC has put together useful guidance for now that helps answer a lot of these questions. But more will come up.
Markets are evolving because demand and information are evolving. As long as we understand the very clear upsides and advantages to letting these markets prosper and demonstrate utility (within a clear regulatory framework) that’s a societal net-positive.
And we’re excited for what’s to come.