While you could argue that prediction markets have been a magnet for outrage for some time, they are now in the eye of a broader and very ugly-looking storm.
- Prediction markets are facing growing backlash from politicians, media, and regulators after controversial bets tied to war and political events.
- Despite existing rules under the Commodity Exchange Act, offshore platforms and ambiguous event contracts have created legal confusion and public outrage.
- At the same time, companies, exchanges, and lawmakers are competing to regulate, expand, or profit from prediction markets, especially in sports where most of the money is made.
Yes, the courtroom battles over the legality of sports-related event contracts offered by the federally regulated exchanges continue to rage. But those are really fights about gambling, and now things have progressed beyond that.
“Prediction Markets Are Eroding Our Civic Soul,” screams a headline from The New Republic; “Chaotic Prediction Markets Need Reining In,” argues the Bloomberg editorial board; “Prediction markets are rife with insider betting,” says The Economist (before pondering if that’s actually a horrible thing).
Wagers tied to the ongoing military action in the Middle East are arguably the catalyst for these recent and fierce critiques of prediction markets.
“It’s insane this is legal,” tweeted Connecticut Sen. Chris Murphy on Saturday. “I’m introducing legislation ASAP to ban this.”
There is legislation that does technically ban “this.” It’s the Commodity Exchange Act, under which there are rules that prohibit prediction markets from offering event contracts tied to “terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law.”
Insane on the blockchain
But this is a distinction that is going to be lost, rightly or wrongly, fairly or unfairly, on the general public and perhaps even some members of the media. Polymarket continues to run an “offshore” prediction market that doesn’t have to abide by U.S. regulations. Also, there are event contracts that are war-adjacent enough to get painted with the same brush as ones that reference military conflict more bluntly.
Commodity Futures Trading Commission-regulated Kalshi, for instance, facilitated wagering on when Iran's "Supreme Leader" would be "out" of office. How exactly he'd leave was left open, but war had to be a conceivable reason for some bettors. A rules kerfuffle at Kalshi then ensued over how they settled that betting market.
On Khamenei:
— Tarek Mansour (@mansourtarek_) March 1, 2026
We don’t list markets directly tied to death. When there are markets where potential outcomes involve death, we design the rules to prevent people from profiting from death. That is what we did here.
I know some of you disagree and prefer that we list these…
But everyone still wants a piece of prediction markets.
Granted, not everyone wants the same kind of piece, which has made for a confusing muddle of attempts to ban, regulate, and operate prediction markets. There is no unified front, just a simultaneous bar brawl, gold rush, and public debate. It’s like a cartoon where a big dust cloud with fists, elbows, and feet poke out to let you know it’s a real donnybrook in there.
Some people want to pick a fight with the exchanges, like Sen. Murphy. Other senators, like Oregon’s Jeff Merkley and Minnesota’s Amy Klobuchar, are proposing to ban public officials from trading event contracts.
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct,” Klobuchar said in a statement. “This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain.”
State lawmakers and regulators are getting in on the act as well. There is state-level legislation proposed to try to rein in prediction markets. There are state-level regulators in court challenging the legality of sports-related event contracts.
Another one: @betr says it is launching prediction markets this year with the help of Polymarket pic.twitter.com/fG6nu1EAz4
— Geoff Zochodne (@GeoffZochodne) March 4, 2026
And then there are people who want a piece of prediction markets for other reasons. There are more than a dozen "pending" applications for a so-called "designated contract market" license from the CFTC, including, most recently, that of Smarkets, a London-based sports betting company.
“The water's warm,” said Smarkets CEO Jason Trost during a podcast last year. “And, I mean, if that sports thing holds, like, why not? You have to.”
Then there are entities already involved in the business that want to expand, such as DraftKings. And why not, indeed? As the company noted in its investor day presentation this week, they expect their DraftKings Prediction platform to have an adjusted gross margin that will be 10% to 30% higher than DraftKings Sportsbook, which is subject to state gambling taxes and state regulations, including whether sports betting is allowed at all in those states.
I don’t think DraftKings really cares about offering betting opportunities on military strikes or foreign leaders leaving office. It might care about offering event contracts tied to domestic elections, economics, and culture. But it definitely cares about sports event contracts because sports betting is what DraftKings does.
It’s worth remembering here that sports have been generating the lion’s share of trading volume for prediction markets. They are the (currently) legal sportsbooks for states where there are no state-regulated sportsbooks. While prediction markets generate a lot of buzz and outrage with contracts connected to elections and foreign politics, the real money is being made on sports.
Gemini has self-certified a prediction market contract that could conceivably let people bet on whether a company will be approved to operate a prediction market: pic.twitter.com/oR6yK57S1x
— Geoff Zochodne (@GeoffZochodne) March 6, 2026
Some prediction market operators may fight doggedly to preserve non-sports event contracts. Others aren’t going to care as much, or at all. There doesn't appear to be a unified front among prediction market operators on how exactly they should do business.
So everyone, everywhere, is running in all kinds of different directions when it comes to prediction markets. And yet the operators (and would-be operators) of prediction markets themselves see this chaos and still see opportunity.
What does that mean? To me, it means the absence of clarity means people can define prediction markets however they want. They’re a civic scourge, they’re a problem, they're a sportsbook, they’re a source of data, they’re an exciting business.
Oh, and they’re not going away. Not soon, anyway.
