Prediction markets are platforms where people can trade bets that pay out depending on certain event outcomes. On many modern online prediction markets—which are often powered by blockchain technology—users can bet on almost any future event, from who will win the Super Bowl to the contents of a public company's earnings report. These platforms have experienced a surge in popularity in recent years, with global trading volumes more than quadrupling from $15.8B in 2024 to roughly $63.5B in 2025.
People have been betting on the outcome of events like elections since at least the 1500s. However, three economists in Iowa—who were seeking an alternative, market-based solution to the shortcomings of political polls—are credited with creating the first modern prediction market in 1988. Today, the two most popular prediction markets in the US are the online platforms Kalshi and Polymarket.
Although legislation around prediction markets is still nascent, these platforms are increasingly subject to state gambling laws in the US. Some have suggested that insider trading—which is explicitly forbidden on the stock market—should be similarly prohibited on prediction markets.
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Kalshi's CEO Tarek Mansour has described prediction markets as similar to the stock market—except instead of buying and selling shares of companies, users buy and sell "yes" or "no" on whether an event is going to happen or not.
On prediction markets, bettors bid up or down the price of contracts based on what they expect an event's outcome to be. Bettors bid up prices when they think an event is more likely to occur than the current contract price shows, so they buy the contracts, pushing the price higher. They bid down prices by selling these contracts when they believe an event is less likely to occur, driving the price down due to supply and demand.
The University of Iowa's Iowa Electronic Markets were introduced during the 1988 US presidential election. The beginning of their origin story almost sounds like a joke: Three economists walked into a bar.
The idea that the median estimate of a group can be more accurate than individual expert estimates is called the "wisdom of the crowd," and dates back to the early 1900s. This theory can help explain the perceived value of prediction markets when it comes to polling and more.
For example, if a contract trading is at $0.65, that could be read as the market assigning a 65% probability to that event occurring. The most common format for prediction markets is winner-take-all: The contract settles at $1 if the event occurs, or $0 if it doesn't.
Polymarket CEO Shayne Coplan started building Polymarket when he was 21. Polymarket has been backed by billionaire investors such as Peter Thiel and Vitalik Buterin.
In 2024, after Polymarket markets favored what turned out to be the winning outcome of the US presidential election, agents raided Coplan's New York City apartment. Coplan, who was only 26 years old at the time, was home during the raid and turned over his devices to authorities.
While prediction markets encourage bettors to use their knowledge of a situation to inform their trades, these platforms have faced questions about when this borders on insider trading. For instance, traders on Kalshi can bet on who Taylor Swift's bridesmaids will be—but some worry that it would be unfair for Taylor Swift herself to earn money on that specific bet.
Critics point to incidents such as traders placing bets on the Venezuelan President Nicolás Maduro's capture and the two people in Israel who were charged on suspicion of using classified information to place bets about military actions.
Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan are both billionaire CEOs of the top two prediction markets—but they don't exactly get along. For instance, Mansour reportedly does not say the word "Polymarket" out loud, referring to it as the "non-American, unregulated platform."
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