Policy Backgrounder by The Conference Board: “On the eve of the 2024 presidential election, while polls showed a race that was too close to call, online platforms called “prediction markets” told a different story. Contracts trading on the largest prediction market, Polymarket, placed the President’s odds of victory as high as 67% in the closing week of the race. For supporters of prediction markets, the President’s eventual victory – with nearly 58% of electoral votes – was evidence of their power to more accurately predict future events than existing methods, a phenomenon that has led Polymarket’s CEO to call them “global truth machines.” The outcome also helped shift what had once been a relatively obscure interest of some economists and traders into a mass market phenomenon – monthly volume on Polymarket and Kalshi jumped from less than $1 billion in mid-2024 to nearly $24 billion by early-2026.
Fundamentally, prediction markets are simple – users trade contracts tied to the outcome of a future event. In the most common format, an “event contract” might pay $1 if a candidate wins an election, if a hurricane makes landfall in a specified region, if inflation exceeds a stated level, or if a sports team wins a championship. This functionality could have both entertainment value – in the case of a contract that hinges on the length of the Super Bowl halftime show, for example – and real economic value – such as contracts predicting US gas prices.
For events with significant trading volume, supporters argue that these markets can translate large amounts of complicated real-world information into a market price that more accurately predicts events than existing methods such as polls or expert analysis. However, prediction markets have also raised significant regulatory and legal concerns related to alleged insider trading, outcome manipulation, regulatory arbitrage, and other issues. These questions have prompted policymakers and stakeholders to debate whether legal or regulatory action may be needed to protect users, clarify the boundary between trading event contracts and gambling, and preserve the potential economic value of prediction markets…(More)”.
