The Central Lie of Prediction Markets

A few hours before Donald Trump gave his State of the Union address, Republican sources told the PBS correspondent Lisa Desjardins that the speech would break records. The president would speak for more than two hours, she reported on X, and one reliable source claimed he might ramble on for 180 minutes.

The post went viral. At about the same time, the market started to move on Kalshi, an online platform where people can invest money in the outcome of a given news event. (Don’t call it gambling.) Forecasts on “How long will Trump speak for at the State of the Union?” shot up by 10 minutes after Desjardins posted: Armed with what they perceived as insider information, users thought they could make a buck by accurately “predicting” the outcome of his speech.

But others speculated in a different direction. “They’re leaking a bunch of stuff about a super long speech and he’ll go about 2 minutes short of the supposed mark and everyone in the white house will make $200k on it,” one Bluesky user, ‪@danvogfan, posted a few hours after Desjardin’s post went viral. In other words, maybe the sources really did have good information—but they were throwing others off track to manipulate the market and profit for themselves.

Prediction markets such as Kalshi and Polymarket have ushered in a moment when anyone with access to exclusive information related to a major news event can do this, even as the platforms themselves prohibit market manipulation. Trump ultimately didn’t speak for as long as the sources had said: He ended after an hour and 47 minutes. Anyone who had bet according to the information that Desjardins had reported would have lost money. “We live in such a profound dystopia,” another popular Bluesky user wrote above @danvogfan’s post after the fact.

[Read: America is slow-walking into a Polymarket disaster]

We can’t say definitively that any insider trading has actually happened, though other suspicious incidents have occurred. In early January, one Polymarket user bet more than $30,000 on Venezuelan President Nicolás Maduro being ousted just hours before he was captured by the U.S. military. (The bet paid out $400,000 and led Representative Ritchie Torres to introduce a bill that would ban federal workers from using prediction markets.) Last month, Israeli authorities charged two people on suspicion of using classified information to bet on military operations on Polymarket. And this past weekend, an anonymous trader who goes by the name Magamyman made more than $550,000 on Polymarket by betting on the timing of U.S. and Israeli strikes on Iran and the fate of its supreme leader.

Welcome to the democratization of insider trading, brought to us by platforms that let people wager on election outcomes, sports, and “Taylor Swift pregnant before marriage?” The prediction markets frame bets as tradable “shares” that rise and fall like stocks, financializing every current event and piece of online ephemera and generating a pervasive hum of paranoia: The world as a hedge fund, where everything can be a derivative. Greed is good.

Prediction markets claim to harness the wisdom of crowds to provide reliable public data: Because people are putting real money behind their opinions, they are expressing what they actually believe is most likely to happen, which, according to the reasoning of these platforms, means that events will unfold accordingly. Many news organizations, and Substack, now have partnerships with prediction markets—the subtext being that they provide some kind of news-gathering function. Some users who distrust mainstream media turn to the markets in place of traditional journalism.

But in reality, prediction markets produce the opposite of accurate, unbiased information. They encourage anyone with an informational edge to use their knowledge for personal financial gain. In this way, prediction markets are the perfect technology for a low-trust society, simultaneously exploiting and reifying an environment in which believing the motives behind any person or action becomes harder.

Polymarket did not respond to my request for comment. In response to concerns about trading on the outcome of the Iran strikes, the company said that it aims to “create accurate, unbiased forecasts for the most important events to society.” Jack Such, a spokesperson for Kalshi, told me, “War markets put Americans at risk and have absolutely no place in prediction markets.” Unlike Polymarket, which technically operates outside of the United States, Kalshi is subject to U.S. government regulation. It does not allow bets on wars or assassinations, though it did host a vaguely worded market pertaining to whether Iranian Supreme Leader Ayatollah Ali Khamenei would be “out.” After he was killed in the conflict, Kalshi did not resolve the market to “Yes,” enraging some users.

[Read: Your phone is a slot machine]

“We share the concerns about war markets, death markets, and insider trading. We don’t allow any of these on Kalshi,” Such also said. “Having a market on whether or not the U.S. will enter a civil war is insane. Not all prediction markets are the same.” (Polymarket has indeed hosted such markets.)

But these differences, though relevant in specific instances, do not have much bearing on the larger problems that these platforms contribute to. Prediction markets are selling a philosophy: Tarek Mansour, Kalshi’s CEO, said that the company is “replacing debate, subjectivity, and talk with markets, accuracy, and truth,” and Polymarket’s CEO, Shayne Coplan, said his company is “the most accurate thing we have as mankind right now.”

On X, both Polymarket and Kalshi have their own accounts that act as news feeds, where they post engagement-baiting and occasionally misleading headlines and speculate about world events that, conveniently, one can bet on via their platforms. On Tuesday morning, Polymarket’s X account looked an awful lot like a news wire, posting, “BREAKING: Ken Paxton projected to win today’s Texas Republican Senate Primary” and putting his odds at 83 percent. Paxton ended up with about 40 percent of the vote, slightly less than his opponent John Cornyn, who was polling at 18 percent on Polymarket at the time of the post; the two will compete in a runoff election in May.

The markets also encourage a kind of meta-game. People are betting on outcomes, but they are also hedging with side bets. For example, this winter, the Polymarket entry titled “Will Jesus Christ return before 2027?” climbed from 1.8 percent betting yes to roughly 4 percent betting yes in one month. The bizarre spike made the rounds online before a perceptive X user noted that the real reason for the change was that Polymarket traders had created a secondary market to bet on whether the odds of Christ returning would climb above 5 percent. Those traders were then manipulating the original “Will Jesus Christ return before 2027?” market to try to make money on their secondary bets.

[Read: You’ve never seen Super Bowl betting like this before]

This means that the markets don’t always reflect what people think will happen as much as they reflect what people think other people think will happen. This certainly gives the lie to the promise of accurate, truthful information from these platforms, as do the suspected incidents of insider training. When a market is manipulated by people with exclusive information, it does not provide clear, actionable intelligence to everyone else. That’s because many of these markets come and go quickly. Somebody who was up at 2 a.m. and happened to be paying attention to Polymarket’s Iran-air-strike market may have been able to pick up on Magamyman’s big bet and gain a subtle informational edge, but it is absurd to compare this subtle signal to credible reporting or intelligence. Kalshi, at least, seems to realize this; Such told me that the platform “bans insider trading not only because it’s unfair, but also because it erodes trust.” (Insider trading is also illegal, a point that a spokesperson for the White House repeatedly pointed out to me, without addressing my questions about whether the administration has its own rules forbidding government workers from participating in prediction markets.)

So they’re specious forecasting tools. Yet the prediction markets are bad for another, much more obvious, corrosive reason: Beneath the veneer of forecasting, the platforms are funneling gamblers to markets to bet on human suffering and acts of war. The top market on Polymarket’s homepage as I wrote this sentence was “Will the Iranian regime fall by June 30?” More than $6.7 million has been wagered on it so far. Betting on geopolitics and military operations allows traders to profit off of death, and it transforms people, politics, death, trauma, everything into commodities. In the wake of the first strikes on Iran, Polymarket briefly allowed trades on when a nuclear weapon was likely to be detonated. Current events, no matter how heinous, become entertainment, a business plan, or both—what Jason Koebler of 404 Media recently dubbed a “depravity economy.”

As the depravity economy grows, it will break whatever trust we have left in one another: If prop bets spur athletes to play differently, this poses an existential threat to the integrity of live sports. If people believe that anonymous government insiders are profiting off of classified information, what reason is there to trust anything that the administration says? There’s a term called the liar’s dividend, which describes an information environment where mis- and disinformation such as deepfakes become so prevalent that anyone accused of doing something awful can simply use them to cast doubt on genuine evidence. Prediction markets offer an insider’s dividend, creating an environment where the prevalence of prediction markets and insider trading becomes great enough that everyone assumes a given decision was made to enrich those with an edge.

This is the central lie of prediction markets: They claim to get us closer to the truth but, in the end, they make us less certain about the world. But this erosion of trust is a feature, not a bug, for these platforms. A world where people are suspicious of every motive is a world where the cold logic of gambling feels more rational. A zero-trust society is one where the prediction markets’ dubious “wisdom of crowds” marketing seems extra appealing.

In this way, prediction markets are a system that justifies its own existence—a well-oiled machine chipping away at societal trust while offering a convenient solution to its own problem. The prediction markets have done what any savvy trader or firm might—they’ve hedged their bets. The house can’t lose.