Polymarket has grown from $1.1 billion in July 2025 to $11 billion, in less than a year. Kalshi is even bigger, at $40 billion.

You’ll notice I didn’t say what those billions of dollars are. The futures predictions markets would prefer you call them contracts. Others, including the state of Nevada, the U.S. Ninth Circuit Court of Appeals, and almost all European countries say it is the amounts bet.

Another measure of growth is how many contracts have been created. Glenn Yamagata, who has been studying prediction markets for 36 years, speaking at the recent European Association for the study of Gambling conference held in Copenhagen, said that there were 224,000 contracts created in the last year. One reason there are so many, is that the markets offer nonstop, fast action. They are continuously creating separate short horizon contracts; for example, at 10:35 am “Will the price of Bitcoin be higher or lower at 10:40 am?” But even eliminating short term bets, there were more than 138,000 separate contracts

And this does not count the new CCTV betting. You can bet how many cars will turn left in the next 55 seconds at a busy intersection in Tokyo.

Another sign of growth and a possible explanation for why President Trump appointed Kalshi’s lawyer, Michael Selig, to be the Chair – and only member – of the Commodity Futures Trading Commission (“CFTC”) is that Trump’s son, Donald Jr., was given $300,000 in stock by Kalshi after Trump was elected. Kalshi wants to go public for $40 billion.

It is surprising that so many players and regulators have almost no idea what futures prediction markets actually are.

Here, then, are seven and one-half myths about these markets:

Myth #1: There is no house.

Kalshi and Polymarket would like you to believe that you can only bet on an event happening, if someone else is putting up money that the event will not happen.

The operators claim to be commodities markets. But all commodities markets, including the more traditional ones for the future prices of corn or wheat, have market makers. These are wealthy individuals and companies that stand ready to cover almost any bet, at any price, and to close the gap between what buyers and sellers are willing to spend. They make money by being the ultimate insiders, knowing exactly how much people are willing to spend, and making a penny here, and a penny there, on billions of trades.

They do sometimes bet wrong. Kalshi refused to pay $54 million to traders who won their bets, that Iranian leader Ayatollah Ali Khamenei would leave office before March 1, 2026. Kalshi asserts that “leaving office” does not include being killed in a war. Kalshi admitted in court that it has a subsidiary that puts up the money.

Myth #2: Prediction markets are real markets.

The definition of fair market price is what willing buyers and sellers agree to pay. The price for prediction market contracts is set by the market operators. Take the $529 million in winning trades insiders placed on when airstrikes on Iran would begin. They paid as little as ten cents to win one dollar on their trades. Were there really people willing to put up $400 million at 90 cents to win a dollar that Trump would not go to war against Iran? A true market would have looked radically different.

Myth #3: Prediction markets are regulated.

Under the Commodity Trading Act (“CTA”), contracts can be legally traded only if they are regulated by the CFTC, the Commission that consists of one person, Michael Selig, Kalsi’s former lawyer. Selig has been too busy suing states on Kalshi’s behalf to propose, let alone enact, regulations for consumer protection, money laundering and financial transparency. The rules he finally passes will be immediately challenged, since the CFTA is required to have five members, no more than three from one party.

Selig hasn’t decided if he should police the actual sports events, as well as the futures contracts. Selig doesn’t even know if he is in the business of regulating gambling. He asked for comments on the following:

What aspects of responsible gaming standards, such as self-exclusion programs, monetary or time limits, or advertising limits, disclaimers, or warnings, should the Commission consider in its public interest determination?

Myth #4: Prediction markets have protections against insider trading.

Insider trading is a characteristic, not a flaw. Money draws out people who do know how things work. Trump’s speechwriter was caught betting on what words Trump would use in his speeches. George Santos, a former Congressman and convicted felon, was recently banned for life by Kalshi for betting that he, himself, would not attend the State of the Union Address. He did not attend.

At its most extreme, some markets allow bets on events that have already taken place, but not yet been broadcast.

Myth #5: There are protections against underage betting.

This one is only half wrong. Prediction markets assert that they are not gambling, so they accept players as young as 18. Nevada, and all but a handful of states, require bettors to be at least 21.

Extremely young adult males are a great market for something that looks like sports betting. Kalshi reported this year users ages 18-to-21 spent more than $5.4 billion.

Myth #6: Prediction markets are always better than polls and experts.

Prediction markets are often better than individual experts, because they reflect the wisdom of crowds and insider trading.

But the markets fall apart at the extremes. After Barack Obama beat Hillary Clinton for the Democratic nomination for president in 2008, some Clinton supporters were so emotionally invested in her winning that they put up $5 to win $100 on an Irish prediction market three weeks before the election. They literally could not win: Under the terms of the contract, if Obama died, the bet would be voided.

I am a professor of law and legal consultant to governments, industry and players. So, this myth, and the next, dig deep into legal issues. So, feel free to stop reading here. But know that these legal issues may decide whether the U.S. Supreme Court allows prediction markets to take players from every state, subject only to the whims of Kalshi’s former lawyer, or allows every state to bring criminal charges for illegal gambling against everyone involved, including the president’s son.

Myth #7: Congress was only concerned with “gaming,” not “gambling.”

A few courts bought this argument initially, when Kalshi started with bets on elections. Kalshi, itself, said that this was nothing like betting on sports.

In 2010, Dodd-Frank amended the CTA to allow futures far different from farm produce. Members of Congress expressly declared that they did not want gambling. But they wrote the restriction,

The CFTC may find contracts “are contrary to the public interest if… [they] involve…

(V) gaming; or

(VI) other similar activity…”

U.S. District Court Judge Jia M. Cobb wrote the most embarrassing early decision, apparently not knowing that American law uses gaming as a euphemism for gambling, as in the American Gaming Association, Gaming & Wagering Business trade journal and International Association of Gaming Regulators. More states follow Nevada’s lead – Nevada Gaming Control Board and Gaming Commission – than call their regulators “gambling” agencies. She dismissed the Indian Gaming Regulatory Act by declaring that sports betting was playing a game.

Of course, even if gaming does not mean gambling, the Special Rule includes “other similar activity.”

Myth #8: Futures prediction markets involve “swaps.”

This is admittedly extremely esoteric. But it is the main reason that the Ninth Circuit unanimously ruled that Nevada could regulate Kalshi under the Silver State’s gambling laws.

Dodd-Frank preempted all state laws, including gambling laws, for “swaps,” which it defined as events. But current prediction markets are not making contracts on whether an event like the Super Bowl will or will not occur, they are taking bets on the outcomes of events.

Kalshi’s biggest problem in convincing courts that it only deals with swaps, and not with sports bets, was its own advertising. The Ninth Circuit’s opinion begins, “KalshiEX, LLC advertises itself as ‘the first app for legal sports betting in all 50 states.’”

It concludes, “That Kalshi’s sports event contracts are, in reality, sports bets is not just an ‘I know it when I see it issue’. . .Rather, everyone, including Kalshi, knows it when they see it.”