The millionaire business of predictive markets, out of control: this is how you make money betting on the future

The phenomenon caught the attention of investors, the media and even political leaders, who began to use the probabilities provided by these markets as one more indicator to anticipate certain events.

However, its growth also accelerated the debate about limits of a model that, for many specialists and regulators, increasingly looks more like a betting house than a collective intelligence tool.

The discussion is not new, but it gained strength as these platforms began to move million dollars already starring in episodes linked to alleged insider information usein addition to facing investigations and restrictions in different countries.

In the ArgentinaFor example, in March the Justice ordered the blockade of Polymarket throughout the national territory considering that it operated as a online betting system without the corresponding authorization. The measure affected both the website and its applications for Android and iPhone.

The objective of these platforms is simple: allow thousands of users bet money on the outcome of a future event. The logic is similar to that of a financial market, where each participant buys or sells positions according to the probabilities they assign to a certain event.

In the case of Polymarketoperations are carried out using the stable cryptocurrency USDC and about infrastructure blockchaina scheme that allows operating in a decentralized manner and that, at the same time, complicates the application of some traditional regulations.

Available questions cover practically any topic. It is possible to bet on the result of a presidential election, the beginning or end of a war conflict, the approval of a law, the evolution of an economic variable or the success of a scientific experiment.

There are also markets linked to meteorological phenomena, judicial investigations, international events and sports competitions.

In theory, the goal is to leverage the distributed knowledge of thousands of participants to estimate which scenario is most likely to occur. Those who defend this model maintain that economic incentives make those who have better information willing to reflect it in their bets, generating More accurate forecasts than other traditional methods.

During the United States presidential campaign between Donald Trump and Kamala Harris, for example, Polymarket gained enormous visibility because it showed a advantage for trump when a good part of the surveys still reflected a much more even scenario.

This type of success boosted the popularity of the sector and led some media to begin to incorporate its probabilities as a additional data to analyze current events.

The growth also exposed a difficult question to answer: Are there limits on what events can become the subject of bets?

In Kalshi They assure that yes. “Profiting from death is not allowed in Kalshi, and that is a good thing,” said Elisabeth Diana, the company’s communications manager. However, this criterion is not replicated throughout the industry.

Polymarketconsidered the largest predictive markets platform in the world, operates under a decentralized scheme which allows you to escape some restrictions of US law.

Although the company is based in New York and its founder and CEO, Shayne Coplanis a citizen of that country, certain prohibitions applicable to traditional betting houses do not apply to this type of platforms in the same way.

Furthermore, even though a market do not state explicitly a bet on a particularly sensitive fact, the way it is worded may end up allowing operations with a very similar result.

For many analysts, that ambiguity demonstrates that regulatory discussions did not appear as a consequence of the recent growth of the sector, but rather were part of its design from the beginning.

Although platforms are often promoted as tools to anticipate political, economic or social eventsmost of its activity is concentrated in another segment.

Bets related to elections, wars, inflation or scientific discoveries often attract media attention, but represent a relatively small fraction of the total volume operated. The numbers show that the main business continues to be the sport.

In Polymarkethe 64% of all activity corresponds to sports markets. In Kalshiduring competition seasons, that percentage reaches 90% of the traded volume.

This information is key to understanding why doubts grew around the sector.

While sports betting is subject to specific regulations in much of the world, predictive markets still operate under much more flexible legal frameworks in numerous countries.

For their critics, that difference allowed them to compete with traditional bookmakers under considerably less demanding rules. For those who promote these platforms, however, it is a new market that should not receive the same regulatory treatment.

As predictive markets gain scale, so do the doubts about its possible consequences.

In April, the scientific journal Science published an analysis in which it identified three major areas of concern linked to the rapid expansion of these commercial platforms: the manipulation risk of democratic processes, a design increasingly similar to that of the gambling and its possible impact on the public health.

According to the authors, when there is a economic incentive Associated with the result of an election or a political decision, there also appears an incentive to try to influence that process and obtain a profit.

The work also warns that the experience of using these markets shares characteristics with sports betting and other games of chance, a dynamic that could favor addictive behaviors similar to those associated with gambling addiction.

The debate is not only theoretical. During the last months, the episodes that awakened suspicions about the use of privileged information to make profits within these platforms.

One of the most resonant cases occurred in the United States, where the Justice accused the special forces sergeant Gannon Ken Van Dyke having obtained close to $400,000 through a series of bets related to Venezuela.

For the prosecution, the military took advantage of information sensible obtained by his position to anticipate events. He currently faces charges that could lead to a sentence of up to 60 years in prison.

Investigations also appeared about traders who recorded unusually high success rates in markets related to military actions in the Middle Easttrade decisions by Donald Trump’s administration and even high-impact international advertisements.

In another controversial episode, a user made a profit after betting on an unusually high temperature on the outskirts of Paris. The investigation detected that a person had manipulated the environment of the weather sensor used to record the official data, bringing a hair dryer to it to alter the measurement.

For critics, these cases show that the problem is not only about getting a prediction right, but also about the possibility of benefiting financially when someone accesses relevant information before the rest or even tries to modify the result on which they bet.

Las companies in the sector They reject the idea that their platforms are simply a digital version of betting houses.

Those who promote these markets maintain that they constitute a tool capable of reflecting, in real time, the collective knowledge of thousands of participants and generate more accurate forecasts than other traditional mechanisms.

David Bensoussan, organizer of Manifesta festival dedicated to predictive markets, even suggested that these platforms could be useful even for decision-making officials on international conflicts.

“If you’re some kind of decision-maker or high-level legislator in DC, and you have to do something about Israel or Iran, a betting market is plausibly useful“he stated.

This argument, however, clashes with the position expressed by the researchers of Sciencewho consider that precisely that combination between sensitive information and economic incentives represents one of the biggest risks of the model.

The discussions have already begun to move to the political level. In the United States, Republican Senator from Utah Blake Moore presented a bill to ban betting markets that it considers contrary to the public interestincluding those related to terrorism, murders, wars or elections.

Meanwhile, different countries are moving forward with increasingly restrictive criteria.

In the ArgentinaPolymarket permanece blocked by order of Justice following an investigation that concluded that it operated as an unauthorized online betting system. The resolution ordered the blocking of the site throughout the country and ordered Google and Apple to restrict access to their applications for Argentine users.

The measure came a few days after a controversy linked to a market that allowed betting on what the inflation data reported by INDEC. Minutes before the official publication, an abrupt change in betting was recorded that coincided with the result finally released by the organization, an episode that fueled new suspicions about the use of insider information.

The rise of platforms such as Polymarket and Kalshi shows that there is a growing interest in tools that combine cryptocurrencies, blockchain and collective prediction mechanisms to try to anticipate future events.

However, the evolution of the sector also revealed a contradiction.

Although these companies often present themselves as a new way to generate useful information about politics, economics or geopolitics, the majority of their income continues to come from sports bettingan activity that in most countries already has much stricter regulations.

This reality explains why governments, regulators and specialists began to observe them more closely.

The challenge for the industry will be demonstrate that these markets can offer different value that of a conventional betting platform. If it does not succeed, it is likely that it will end up facing a regulatory framework increasingly similar to the one that governs online gambling today.

For now, growth continues. But the debate about its limits, the associated risks to insider information and the impact it can have on society is just beginning.