Sadie Whittam uncovers a host of legal dangers in the popular trend for trading in predictions of specific events
Prediction markets are a rapidly growing global phenomenon, and Polymarket and Kalshi are the key players. Polymarket is a decentralised, crypto-native platform, whereas Kalshi is regulated by the US Commodity Futures Trading Commission (CFTC). Prediction markets allow users to purchase event contracts on a whole range of topics, including pop culture, cryptocurrency, sporting outcomes and politics. Users purchase event contracts at a set price between 0.01 and 0.99 in the relevant currency. For example, if a user purchased an event contract at $0.92 on the question, ‘Will a New York Times front page headline use the term “blockade” this week?’, this indicates a 92% chance that this will happen. If a New York Times front page headline does use the term ‘blockade’, the market resolves to ‘Yes’, and those who bought the ‘Yes’ side of the event contract receive $1, while those who bought the ‘No’ side of the contract
