There's Lots Of Noise About Prediction Markets In Congress. But Will Anything Happen?
Roundup: More on the fallout for Polymarket and Kalshi on Iran markets; Kash raises $2M to bring prediction markets to social media.
There’s a bunch of markets at Polymarket with the title “nothing ever happens,” which is a bit of an inside joke. But people also trade/bet on it (please don’t hate me for using the Substack integration):
It’s clear from the events of this weekend that prediction markets are again pissing people off in a material way, including some folks in Congress. But "nothing ever happens” is a phrase that can apply to Congress a lot of the time, as well.
If you’re playing catch-up, Polymarket had lots of markets and betting about Iran strikes, including the death of Supreme Leader Ali Khamenei. And there was some possible insider trading. Meanwhile, Kalshi had a market about Khamenei that was technically not about his death, but became a giant cluster*** as a result.
I wrote about it this weekend, if you missed it:
Coverage from the weekend was largely negative for both prediction markets. Here is a sampling from around the media:
Bets on Fate of Iran’s Khamenei Spark Uproar at Leading Prediction Markets (WSJ): “Before U.S. and Israeli missiles struck Tehran, users of Kalshi and Polymarket placed short-term wagers that Iran’s Supreme Leader, the Ayatollah Ali Khamenei, would be out of power. Now, those bets are under scrutiny after the killing of Khamenei. Some U.S. lawmakers have raised questions about whether the markets should be allowed, and if some anonymous traders had inside information ahead of the strikes. Meanwhile, some users complained about how their bets were resolved.”
Iran Strikes Expose the Dark Edge Case of Prediction-Market Era (Bloomberg): “Prediction markets have spent the past year courting Wall Street money and Washington legitimacy with an ambitious pitch: markets that let people bet on real-world events can produce better, faster information than any alternative. This weekend, as US and Israeli bombs fell on Iran and traders rushed to cash in, the war exposed just how morally and legally fraught that proposition can get.”
Prediction market trader ‘Magamyman’ made $553,000 on death of Iran’s supreme leader (NPR): “An account trading under the username “Magamyman” made more than $553,000 placing bets on the prediction market Polymarket that Iran’s Supreme Leader, Ayatollah Ali Khamenei, would be out of power just before an Israeli strike killed him on Saturday.”
‘Insane This Is Legal’: Democrats Allege Trumpworld Insiders May Be Betting on War in Iran (Notus): “Multiple Democratic lawmakers criticized the lack of regulation on online betting platforms after reports that people — who they alleged may have had advance knowledge — made millions by predicting the U.S.-Israel strikes on Iran. Their calls for more limits on prediction markets came after multiple Polymarket wallets racked up hundreds of thousands of dollars by betting that the U.S. would strike Iran on Saturday, just minutes before U.S. and Israeli forces launched the first attacks across the country on Saturday morning. Users on Polymarket and Kalshi also placed large bets over the weekend on other Iran-related questions, including whether U.S. and Israeli forces would kill Iranian Supreme Leader Ayatollah Ali Khamenei.”
War is the new get-rich-quick play on prediction markets (Axios): “We have functionally created multi million dollar markets where a single rogue action is incentivized to the tune of tens to hundreds of millions dollars; representing a significant risk for global peace,” Ryan Kirkley, co-founder of the digital market structure company Global Settlement Network, tells Axios.
Polymarket Bravely Defends Betting On World War 3 As A Valuable Public Service (Kotaku): “As a new, unfathomable war in the Middle East emerges, Polymarket betters are hoping to fathom enough for a jackpot. The gambling platform, which lets you bet anonymously on anything from basketball games to bombing campaigns, has been an unending source of controversy. Justifying letting the world wager on mass death, Polymarket claims they also act as a public service, an ‘unbiased forecast’ for people to rely on.”
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The question is if all the noise and uproar over prediction markets actually leads to any serious pushback. Or are prediction markets immune — at least from the whims of Congress — because it’s so difficult to get anything done on Capitol Hill?
Most of the criticism continues to come from Democrats, which is easy to wave away as insignificant. Here’s what I saw in the wild this weekend:
(It’s worth noting all of the above is about Polymarket’s international site, which Americans can’t technically use. It’s also not clear anyone in the Trump administration can or wants to do anything about Polymarket’s international business, after the CFTC and FBI reportedly closed investigations into the company last year.)
But there’s also been a decent amount of public chatter in recent weeks from some Republicans, including Senate Agriculture Committee Chair John Boozman (R-Ark.) and Utah Gov. Spencer Cox.
Still, if you had to handicap Congress doing more than yelling loudly about all this stuff, you’d have to make that outcome an underdog.
But prediction markets are also drumming up controversy almost every week. The industry was almost a non-issue in Congress and around the country, until Commodity Futures Trading Commission Chairman Michael Selig started stirring the hornet’s nest a few weeks back.
Is it impossible to think Congress would get involved in a material way? I’d say the odds have shifted toward congressional action in the past few weeks. Although the odds are still long.
Will something happen? I’d still put my money on “nothing.” But things are changing fast, always, in prediction markets land.
Prediction markets roundup
Insider Trading Is Shaping Prediction Markets. Polymarket Sees an Edge (Barrons): On Dec. 16, a new anonymous account on prediction-market platform Polymarket made a $68,000 bet that Kevin Hassett would be nominated as the next Federal Reserve chair. An official Polymarket social-media account posted a screenshot of the trade, seeming to suggest it came from a person in the know: ‘Either @novice99 can read Trump’s mind, or they’re serving coffee at Hassett’s breakfast meetings.’”
“On a stock exchange, any evidence of insider trading would quickly draw the attention of corporate counsels and regulators. On prediction markets, it could be an unavoidable part of the business model. Stand CEO Edward Ridgely, who designs software for prediction-market traders, says there are times when ‘insiders are obviously shaping the market.’ He pointed to the spike in Polymarket odds that Taylor Swift would get engaged hours before the pop star’s official announcement.”
Interesting…:
Here’s the video:
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Kash Raises $2M Pre-Seed to Bring Prediction Markets to Social Media (press release): Kash, a social-native prediction market platform, has raised $2 million in pre-seed funding to transform how conviction is expressed online. Built directly into social media, and starting with X, Kash turns everyday posts into live, tradable markets on real-world events, embedding forecasting into the social feed itself.
Backed by leading venture investors including Big Brain Holdings, Spartan Group, Coinbase Ventures, Kosmos Ventures, Halo Capital, MoonRock Capital, Polaris Fund and Fabric VC, Kash is positioning prediction markets where attention already lives: inside the platforms that shape global conversation.
Rather than debating outcomes in comment threads, users can now express conviction through simple interactions with @kash_bot. No new clunky apps. No complex external trading interfaces. Just scroll, quote-post, predict and let the market price the truth in real time.
“We’re embedding an entirely new financial vehicle where people already live, and enabling users to place, and even permissionlessly create prediction markets, directly from their feed” - said Lucas Martin Calderon, Founder and CEO of Kash. “People already hold opinions on elections, macro, sports, and culture. Kash transforms those opinions into tradable positions and rewards those who are right.”
The Prediction Market Debate Is Older Than You Think (Bloomberg): “On this week’s episode of Everybody’s Business, we team up with our friends Jacob Goldstein and Robert Smith of Pushkin’s Business History podcast as part of a live mash-up at On Air Fest in Brooklyn. Goldstein and Smith explain why the controversies and questions raised by prediction markets (explored in the latest Bloomberg Businessweek cover story) are nothing new.”
Kalshi and Polymarket Are Economic Oracles (Bloomberg): “Most importantly: Are prediction markets superior to experts and market instruments in forecasting future macroeconomic events? And can the prices on platforms including Polymarket and Kalshi Inc. guide important individual and social policy decisions?”
Coinbase’s head of litigation says states are ‘gaslighting’ on prediction markets (CoinDesk): “Ryan VanGrack, Coinbase’s VP of legal and global head of litigation, is sharpening Coinbase’s challenge to state regulators, saying they are trying to rewrite Congress’ authority over derivatives.”
💡My take: I don’t quite get why the legal folks at crypto companies feel the need to be so obnoxious about their stance on the legality of prediction markets. We get it, you think you are going to win. Why not just go win in court? I think I am a pretty reasonable person, and I think both sides have a good case! PR efforts like this just serve to piss off a lot of people, and it’s not clear what they are accomplishing, other than for them to hear themselves talk.