Prediction markets are turning uncertainty into a tradable asset.
On platforms like Kalshi and Polymarket, users can bet on everything from election outcomes to who will show up in the Epstein files, with prices that claim to express the probability of each outcome. As these markets become more mainstream, it’s becoming increasingly unclear whether they should be understood as gambling, investing, or something designed to fit between the two.
Prediction markets operate on a simple premise. Participants buy and sell contracts that pay out if a specific event occurs. A contract tied to an interest rate increase trading at 65 cents, for example, implies a 65 per cent likelihood of that outcome. According to a Vanderbilt University study, prediction markets may produce more reliable political forecasts than polling because participants have money at stake: those who are wrong lose money, and those who are right are rewarded.
In the United States, this logic has been embraced by regulators—at least partially.
After years of legal uncertainty, some prediction markets have been allowed to operate under the oversight of the Commodity Futures Trading Commission instead of state gambling authorities. That change has enabled rapid growth and partnerships with major media outlets, which now sometimes report market odds alongside traditional political and economic analysis. The result is that betting on the news and consuming the news are increasingly happening at the same time.
This has practical consequences. Prediction markets move quickly, often faster than politicians, legislation, or the public can respond. When markets process political or economic uncertainty before institutions have time to deliberate, prices can start to function as verdicts rather than estimates.
Research suggests these markets can be influential. A 2012 National Bureau of Economic Research study found that prediction markets have been able to predict economic outcomes. What the market has priced may begin to feel settled, even when the outcome itself remains uncertain or contested.
In this way, markets can affect the likelihood of the events they claim to predict. A widely cited market forecasting a recession, for example, could influence hiring decisions, consumer spending, and investment behaviour, moving the economy toward the outcome implied by the odds. The line between measuring the future and shaping may be thinner than it appears.
There’s also the more pressing question about what happens when market logic extends into spaces traditionally governed by democratic processes. When elections, policy decisions, or geopolitical events become tradable assets, the benefits tend to accrue to those with capital and, in some cases, access to privileged information. In one recent example, an anonymous trader placed more than $30,000 USD on Nicolás Maduro being ousted by the end of January, shortly before he was captured by American authorities. That bet later paid out more than $400,000 USD.
The costs of prediction markets may be much more than any single wager.
Though profits are collected privately, the consequences of this market activity, including misplaced confidence and public mistrust, are shared far more widely. At present, there’s no legislation in the U.S. that bars government officials from using privileged information to trade on prediction markets, though U.S. Rep. Ritchie Torres (NY-D) has said he plans to introduce such legislation.
Canada has taken a much more cautious approach. Gambling’s regulated provincially, and financial derivatives fall under securities law, which leaves prediction markets in somewhat of a regulatory grey zone. Betting on elections is prohibited, and these platforms operating legally in the U.S. are largely inaccessible to Canadians. Regulators have tended to err on the side of caution, particularly when political outcomes are involved.
In practice, however, regulation is difficult. Many prediction markets rely on anonymous cryptocurrency transactions, which makes enforcement challenging. Polymarket, for example, lists Ontario as a restricted region, but not the rest of Canada, and virtual private networks (VPNs) can be used to bypass such limits, even if doing so violates platform rules. As Matthew Burgoyne, a partner at Osler, Hoskin & Harcourt and chair of the firm’s digital asset and blockchain group, said in an interview with CBC News, “It’s almost impossible, practically speaking, for any securities regulator to absolutely prohibit a platform.”
Even without direct participation, Canadians are regularly exposed to prediction markets through news coverage and social media. At the same time, online gambling—particularly sports betting— has become common among young Canadians, with roughly one third of those aged 18-29 now participating and betting language increasingly becoming part of everyday speech. App-based platforms, easy payment systems, and frequent advertising have made gambling feel routine and low-risk.
Prediction markets fit into this environment by adopting the language of finance and investing while relying on familiar gambling strategies.
Tags
economy, Online gambling, Prediction markets, regulation
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