This year's richest person, the existence of aliens, even the return of Jesus Christ. Believe it or not, people are actually betting on stuff like this. Prediction markets are platforms online where you can bet on future events. The best known platforms are Kalshi, Polymarket, but there are a bunch of others. And over the past year, they've exploded in popularity. Kalshi partnered with CNN, CNBC. Google announcing it will integrate Kalshi's data. MLB naming Polymarket its official prediction market partner.

We have New York Stock Exchange owner taking a stake into Polymarket. You're starting to see Polymarket and Kalshi really get into the mainstream vernacular. If you had me saying potato on Polymarket, you just made a ton of money. Prediction market dude. You know, online peer-to-peer betting. The amount of money involved has skyrocketed. Kalshi currently handles $3 billion of notional trading a week. Just at the beginning of 2025, they were handling $30 million. So, 100x more.

We're seeing pretty similar numbers for Polymarket. The boom is creating a new class of market watchers. You're just placing trades based on the news and the information that you have. Information is power. I was able to pay off my student loans with the money I got from Kalshi. I'm putting myself through grad school. I was able to pay off my car. But most people aren't paying off their bills. They're losing money.

I feel so bad for 18 to 35-year-old males losing so much money. People are gambling on war. As the US and Israel prepared to strike Iran, platforms like Polymarket saw a surge in activity. One of the criticisms of prediction markets is that they've created the financialization of everything. Should you be even allowed to bet on military endeavors or should that be something that is off limits? As these markets get more esoteric and specific, they become more easily gameable,

more difficult to monitor insider trading and market manipulation. So, what happens when you can bet on almost anything? From the perspective of the prediction markets, this is not gambling. This is trading a derivative like any other derivative, whether it's wheat futures or something that has real world utility. Kalshi or any other prediction market, they're regulated by the Commodity and Future Trading Commission on a federal level.

It's a yes or a no outcome. When you buy shares, they can be priced anywhere from one cent to 99 cents. That price is determined by what traders are willing to pay for that outcome at the moment in time. Unlike sports gambling, prediction markets don't have a house taking the opposite side of your bet. We don't actually make money when people lose. Instead, they match buyers and sellers and generate revenue from transaction fees.

Prediction markets are based on supply and demand. It's a peer-to-peer market. If I place a yes on a certain outcome, whether it's going to rain in Central Park tomorrow, there needs to be enough people thinking that it's not going to rain to take the opposite side of the bet. And while you're welcome to make predictions about the weather, most people on these platforms are there for sports. Indiana gonna win, baby. As of March, around 70% of Kaushi's weekly trading volume was entirely made up of sports-related bets.

Sports gambling was mostly illegal in the US until 2018, when the Supreme Court struck down a federal ban. Today, nearly 40 states have legalized it in some form, bringing in billions of dollars in tax revenue each year. The states that have legalized sports betting are upset because they can't control the sports betting that's going on Kalshi, and crucially, they can't collect tax revenues on it. Now, other states that have not legalized sports betting, and they're upset because now without their consent or their control, sports betting is now legal.

Several US states have sued Kalshi, Polymarket, Robinhood, a bunch of other platforms saying that they should have jurisdiction over what they consider to be sports gambling. From the consumer's perspective, even though the underlying plumbing is different and the regulations are somewhat different, when you open the app, very much it's the same experience. Arizona is filing criminal charges against Kalshi, accusing the prediction market exchange of operating an illegal gambling business. We see this as a total overstep, and we look forward to fighting it in court.

Most retail investors, regular people on the street, they're probably less interested in betting on what interest rates will be next month, but they're pretty interested in betting on who'll win the Super Bowl. Billions are also expected to be placed on World Cup outcomes. 93% On Kalshi right now. Yes. Chances of victory. This is how we bring the numbers down. People also like to bet on politics. Polymarket and Kashi particularly got big around the 2024 US presidential election.

This election is gonna be close, but we are going to win. Everyone was talking about the odds of President Trump winning the election. The latest polling from NBC News showing Donald Trump and Kamala Harris neck and neck. And there was somewhat of a gap. Those markets actually predicted that Trump would win more accurately than polls did. So, that helped improve the reputation of prediction markets.

I Donald John Trump. Trump's victory was a win for prediction markets as well. Donald Trump Jr. Is an advisor to Kalshi, and he's both an advisor and an investor in Polymarket. The Trump media company has its own prediction market platform that it's announced called Truth Predict. The Biden administration had been critical and went after Polymarket and Kalshi with mixed results. But the same agency under Trump has come out swinging for the industry to keep it legal.

To those who seek to challenge our authority in this space, let me be clear. We will see you in court. At the end of the day, there's a limit to regulatory control. Polymarket has since become federally registered and is offering some bets in the US again. Even while most people can access the full service via virtual private networks or VPNs. Conversely, Kalshi is trying to expand overseas. For.

Kalshi, they've said they want to be available in 140 different countries. That's the goal. But a cloud of ethical questions linger. Take insider trading. In investing, there are hard rules around who and how information can be used. But here, it's fuzzy. In the original premise of prediction market, an insider information can be a signal. I think what's cool about Polymarket is that it creates this financial incentive for people to go and divulge the information to the market and the market to change.

What we often see in these prediction markets, insider trading is not necessarily a bug that needs to be fixed, but it's very much a feature. From this point of view, people with insider information can profit from it. The most famous example is someone in the run up to the US capturing Nicolas Maduro placed a series of large bets that Maduro would be removed from office. And they ended up making $400,000 off of these bets. That was on Polymarket, so those bets were anonymous, but it appears to be someone who had knowledge that this was going to happen. In some cases, bets don't have to be big to make a difference.

There are so many things to bet on, and some of them don't have a lot of volume or a lot of liquidity. It doesn't take a huge amount of money to move those markets. Polymarket has introduced rules that says are aimed at curbing trading on non-public information, and Kalshi says it will penalize such behavior or refer it to the CFTC. This evolving set of rules doesn't completely squash the ability to stack odds, and profit from insider information, though. And there's also the dubious ethics of being able to bet on conflict or violence.

On Kalshi, you're not allowed to bet on assassination, terrorism, war, because the CFTC has those outlined in its core principles as areas where bets are not permitted. For Polymarket, those rules don't apply because it's international, so it has a lot of markets on areas that people would consider unethical. Another issue is how outcomes are decided. Kalshi and Polymarket layout for betters, what event, resolution criteria, and data sources will determine the answer to the wager. In theory, who wins and who loses should be decided by the real world.

That said, there can be hiccups when these markets resolve. Despite the issues, Kalshi and Polymarket are raising billions of dollars in funding. The boom in online prediction markets is being driven by people like Brandon Fean, a 25-year-old teacher in Pennsylvania. I am not a finance bro. I have no background on the stock market. My friend actually reached out to me and said that there was a way to bet on the Billboard Hot 100 chart and try to predict what song was gonna be number one. And I went,

"There is no way that is a real thing," because that is what I have done since I was in eighth grade. My first trade that I did, well, I lost $600 and I was like, "You know what? I'm all done.". But Fean didn't quit. Instead, he approached it like a professional investor would with research. Sometimes it'll be hours each day, sometimes it'll be one hour for the week. I have seen success with Taylor Swift markets with her album, how many sales she was going to do.

I go on Twitter and I follow fan pages that update on these things and I turn on post notifications, so super easy. Uh, anyone can do it. Anyone can look at how people are finding this information. This is the number one strategy to start making money on PolyMarket today. A lot of people are taking this very seriously and doing a lot of research and trying to get an edge on what they call "dumb money," people who are just kind of winging it. And in some cases, the,

the kind of research they were doing was incredibly sophisticated. A lot of the biggest supporters, they say, "Wow, this will be bigger than the stock market. This will be bigger than all financial assets because it allows you to do everything." And perhaps that's part of the promise. But then the other side of the coin, the majority of people go for entertainment. They go to win some money, they go to watch a game. Be it entertainment or investing, prediction markets tend to produce big winners and lots of losers.

Analysis done by Bloomberg and other outlets shows that on average, betters who invest less money in prediction markets tend to lose more often, and those who invest more money, you know, the professional side, they tend to win bigger. That tendency sounds a lot like Wall Street, where big investors tend to make most of the money. But as with anything this new, everything is subject to change. It's possible that a lot of this could go away. We're also waiting to see how a lot of these court cases shake out. If the courts decide that trading on prediction markets is the same as sports betting and should be regulated by the states,

then that completely changes these companies' business models.