Better Markets director says Kalshi, Polymarket are ‘not genuine markets’

U.S. advocacy group Better Markets said so-called prediction markets operated by Kalshi and Polymarket are indistinguishable from gambling and should be regulated under state gaming laws rather than by federal derivatives regulators.

The criticism was set out by Better Markets Director of Securities Policy Benjamin Schiffrin in a new fact sheet titled “Predictably, ‘Prediction Markets’ Are Just Casinos,” which argues that the platforms are not “genuine markets” and use the prediction-market label to avoid state gambling rules.

“Prediction markets are virtually indistinguishable from a casino, a street corner bookie, a gambling app, or any other place you can place bets,” said Benjamin Schiffrin, Better Markets’ director of securities policy. “They call themselves prediction markets to avoid longstanding regulation by the states, which have regulated gambling for many decades to protect customers and reduce the involvement of organised crime and other financial predators.”

The report argues that prediction markets do not resemble traditional financial markets such as equities or fixed income, saying they lack meaningful regulation, a level playing field and safeguards to ensure fair dealing and settlement of trades.

“Real markets are properly regulated to ensure that the activity is real, that there is a level playing field, and that participants make good on their trades,” Schiffrin said. “That results in genuine trading and fair dealing among participants. Real markets have a regulator to prevent conflicts of interest and to stand between the buyer and seller to ensure the well-functioning of the market. None of that is applicable to these so-called prediction markets.”

Better Markets also raised concerns about consumer harm, saying users of prediction markets are not representative of the general public and tend to be young men, a demographic it described as vulnerable to harmful betting habits. The group cited Kalshi as facing a class-action lawsuit alleging it targeted users with problematic betting behaviour while presenting itself as a safer alternative to traditional sports betting.

The report warned that prediction markets are particularly susceptible to insider trading and manipulation, noting that there are no insider-trading laws governing such platforms, unlike stock and bond markets.

“Kalshi and Polymarket contend that by letting the world know what the ‘crowd’ thinks will happen, their sites provide valuable information that is more accurate than polls or prognostications,” Schiffrin said. “The problem is that, absent inside information, the users on these sites are no more likely to know whether a candidate will win an election or a team will win a game than anyone else.”

As an example, the report pointed to a Polymarket trade linked to events involving Venezuelan President Nicolás Maduro, which it said bore “all the hallmarks of an insider trade.”

Prediction markets are overseen by the Commodity Futures Trading Commission (CFTC), a status the industry has cited to support nationwide operation. Better Markets said the CFTC is ill-suited to regulate what it views as gambling activity, adding that several federal court rulings have found prediction market platforms indistinguishable from gambling operations.

“For these reasons, prediction markets must be properly regulated,” Schiffrin said. “Yet Kalshi and Polymarket claim they should be regulated by the CFTC, the financial regulator for the derivatives market. The CFTC is ill-suited to regulate what is essentially a gambling activity. Recent federal court decisions bear this out, as several judges have found these sites indistinguishable from gambling.”

He added: “Policymakers should follow the lead of these courts. Prediction markets should be recognized for what they are—unregulated, 24/7 casinos. They must be regulated as gambling operations to protect the public before it’s too late.”