The odds were almost evenly split early Monday afternoon: Would Denver’s high temperature reach 71 to 72 degrees? Higher? Lower?
By the end of the day, people wagered over $90,000 on the question, hoping to win money by watching the weather using one of the leading prediction market platforms, Kalshi. These platforms, where people go to make bets on the outcomes of current events, are raking in profits as people try to make a quick buck betting on everything from the next president to whether it will snow in Denver or if “Bridgerton” will be the top show on Netflix.
But the platforms have also drawn criticism about the potential growth of insider trading, gambling addictions in young users, and even “death markets,” which collect wagers on whether deadly events will happen.
Whether people will end up with huge paydays depends mostly on the person’s skill, said Edward Van Wesep, an economist and professor at the University of Colorado.
“If you’re good at predicting things, absolutely,” he said. “Some people are very bad at predicting things.”
Climate and science topics have their own categories of wagers on two of the largest prediction market sites, Kalshi and Polymarket. People are gambling on whether this March will be the hottest March ever and how many hurricanes will happen this year. They’re placing wagers on measles cases and space exploration.
In 2022, users hopped onto Kalshi to wager on the water levels at a huge Colorado River reservoir, Lake Mead, as state and federal water officials warned of crisis conditions in the basin.
But climate change topics are not where the biggest wins are being made. Sports and politics dominate the platforms.
In the 1980s, University of Iowa colleagues looked to prediction markets as a way to predict winners in political elections more accurately than polls. Their work helped set the stage for a multibillion-dollar industry that is quickly gaining momentum.
In 2024, bettors on Kalshi called the outcome of the presidential election. Kalshi’s “Who will win the Presidential Election?” market is still the platform’s largest prediction market by volume, with almost $536 million traded, according to industry reports.
Prediction markets have been around for decades but have taken off since 2020 and 2021, when Polymarket and Kalshi launched, respectively.
Under the Biden administration, the industry faced pushback from federal regulators who said their platforms were too close to gaming and restricted their operations in the U.S.
In 2024, Kalshi won a court battle to be regulated as a financial exchange, like the Chicago Mercantile Exchange, by the federal Commodity Futures Trading Commission. The victory paved the way for new markets like political betting.
The Trump administration has given its blessing to the growing markets, but some states are still tussling with the federal government over the platforms, saying they should be regulated like traditional gambling companies.
(Kalshi contends it is not a gambling site because users do not bet against the “house” with a bookmaker who sets the odds. Van Wesep said this is semantics — other types of gambling, like horse racing, also do not have a house.)
While people try to make money on fluctuating oil prices, changes in Arctic sea ice and government shutdowns, big wins on the prediction market sites have raised questions about insider trading.
One trader wagered $32,000 that Venezuelan leader Nicolás Maduro would be toppled by the end of January just hours before the Trump administration ordered the operation, according to news reports. The trader made more than $400,000 in profit.
Traders wagered over $1 billion as the United States and Israel prepared for war and launched strikes against Iran, betting on aspects of the conflict like who would be the next leader and which countries Iran would strike.
Sens. John Hickenlooper of Colorado and Jack Reed of Rhode Island, both Democrats, sent a letter Monday calling on the Commodity Futures Trading Commission to prohibit gambling contracts on events tied to U.S. military operations.
Insider trading isn’t the most problematic part of the platforms, Van Wesep said. People will stop gambling if they feel the wagers are rigged by a lot of insider trading.
The problem is insiders making choices to do things based on their bets, he said.
“That’s the real problem. It’s one thing when prediction markets reflect the likelihood of things occurring. It’s a completely different story when they cause things to occur,” Van Wesep said. “That, I think, is quite disturbing and needs to be addressed.”
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