Two prediction market operators took over $40 million in trading action on the papal conclave's outcome, despite only a fraction of users picking the winner.
Key takeaways
- Bettors traded $40.6 million at Kalshi and Polymarket.
- Only 416 trades out of 33,000 picked the winner.
- Pope Leo XIV had less than 1% odds.
Prediction market company Polymarket hauled in over $30 million in trades, while rival firm Kalshi recorded $10.6 million. Kalshi's biggest payout was $52,641 on an anonymous customer's successful $526 prediction.
Still, of the 33,000 trades on this market, only 416 correctly identified the eventual pope, Cardinal Robert Prevost of Chicago.
Prediction markets offer controversial model
Predictions markets operate similarly to futures, with users able to buy or sell contracts settled based on a future event's outcome.
Companies like Kalshi and Polymarket were in the headlines recently, most notably over their U.S. Presidential Election markets. Kalshi alone reportedly took $132 million in trading on that market, and during the election, there was significant scrutiny of the platforms and their potential for manipulation or misinformation.
While the platform’s business model is itself controversial, regulating these companies also caused concern among state legislators and officials. Regulators in New Jersey and Nevada—two of the U.S.' biggest sports betting markets - tried to block Kalshi from operating in their jurisdictions, so far without success.
Prediction markets face regulatory issues
Gambling regulators oversee betting companies at the state level, such as the New Jersey Division of Gaming Enforcement, and are bound by state laws on a range of issues, from data protection to licensing. By contrast, the Commodity Futures Trading Commission (CFTC) regulates prediction market companies at the federal level, so they're not bound by state gambling laws.
While U.S. sportsbook companies were prohibited from taking action on the papal conclave, Kalshi and Polymarket faced no such restrictions. However, the CFTC targeted Polymarket, leading to a substantial fine and settlement in 2022. Conversely, the CFTC dropped a similar appeal against Kalshi in recent weeks.
Currently, Kalshi users can trade on a range of events, including the date of Grand Theft Auto VI's release and whether there will be a free trade deal with China. The prediction market model is proving so successful that global betting group Flutter reportedly investigated offering its own prediction markets.
