Do prediction market bettors make anything better?

Prediction markets like Kalshi are rapidly expanding by framing themselves as financial derivative exchanges rather than gambling platforms. By leveraging a legal loophole that classifies betting on future events—such as political outcomes, pop culture milestones, or economic indicators—as "swaps," these companies bypass traditional gaming regulations. While proponents argue these markets democratize information and provide a more accurate "truth machine" than public polling, critics warn of significant risks, including market manipulation, insider trading, and the creation of perverse incentives where participants might influence real-world events for financial gain. Despite ongoing legal challenges from various states and concerns regarding the lack of robust regulatory oversight, the industry continues to grow, with major sports betting apps increasingly adopting similar models to enter new markets under the guise of financial innovation.