$113.5 million was wagered on which song Bad Bunny would open his halftime set with. Not the game. Not the MVP. A song choice. Another $72 million on Super Bowl advertisers. $47 million on halftime guests. A year earlier, Kalshi’s whole Super Bowl offering was a $27 million game-lines market. They grew 18x in one year.
Welcome to the wild world of prediction markets, (mildly) regulated machines of massive wealth creation, where pretty much anything with an uncertain outcome and enough people who care gets a price.
Generating money is cool and all, bro, but I’m concerned about what happens when these markets run amok. I’ll happily throw a couple bucks on a baseball game. But there are increasingly markets we should think hard about before we let them run.
In 2024, Polymarket showed Trump at 65% while polls said the race was tied. That number got amplified as proof of hidden momentum, inevitable victory, a secret consensus the polls couldn’t see. Whether the market was correctly calibrated almost doesn’t matter. The market became part of the story. A measuring tool became a messaging tool. The prediction market helped manifest its own prediction.
These markets are still in their infancy. Things are about to get much hotter.
His argument was simple: nobody knows enough to run everything. Not governments, not experts, not the smartest person in the room. Knowledge is scattered across millions of people, each holding small pieces of a puzzle nobody can fully see.
So how does society coordinate? Hayek’s answer: the price mechanism. When copper gets scarce, the price rises. No memo required. No committee. The signal travels instantly and everyone adjusts. Markets, he said, are the most powerful information machines humans have ever stumbled into.
He won the Nobel Prize in 1974. Good on ya, bud.
Forty years later, some economists at the University of Iowa had a thought:
what if you did this with elections?
The Iowa Electronic Markets launched in 1988. Tiny stakes. Grad students. Zero buzz. But it worked. People betting real money on political outcomes beat the professional pollsters. Consistently. Turns out when you can lose actual dollars, wishful thinking gets expensive fast.
That’s the core insight for prediction markets. Financial skin in the game forces honesty. You stop rooting and start calculating.
Think about the jar of jelly beans at a state fair. Your individual guess is probably wrong. But average a thousand guesses together and the number gets eerily accurate.
This is the wisdom of crowds: diverse, independent people making individual judgments produce more accurate predictions than any single expert.
Kalshi fought their own federal regulator in court in 2024 and won. The ruling established that their contracts are “financial derivatives” — not gambling — which means federal oversight rather than a patchwork of state gambling laws. That distinction is everything. Revenue went from $1.8 million in 2023 to $260 million in 2025. The valuation?
Trades execute via smart contract on Polygon and settle in USDC stablecoin. No bank in the middle. Global by design. In late 2024, the FBI raided founder Shayne Coplan’s apartment after Polymarket called the presidential election for Trump before most networks did. No charges filed. Instead, the Intercontinental Exchange, which owns the New York Stock Exchange, invested $2 billion. Polymarket’s valuation?
$9 billion.
Robinhood got into the act too. Same app, same interface, one tap. They launched prediction markets through Kalshi in 2025 and have doubled volume every quarter. Now their fastest growing revenue line.
Meanwhile Susquehanna opened the first Wall Street prediction markets trading desk. DraftKings bought their way in. Coinbase partnered with Kalshi.
(This stopped being a startup story a while ago.)
As long as you don’t call it gambling, the business model is clean. Small fee on every trade, plus interest on the float. At $871 million in daily volume, that fee schedule prints serious money. And like every other tech-driven company, the data itself is a product. The market signals can be packaged and resold to the institutions already moving markets.
The numbers:
$15.8 billion in volume in 2024. $63.5 billion in 2025. To infinity and beyond!
His model assumes markets measure reality without touching it. Copper prices don’t make copper feel things. But elections respond to narrative. Voters respond to momentum. Media covers odds like news. When something is killing it in a prediction market, people start believing the prediction is correct…
and that belief starts making it real.
Physicists call this the “observer effect.” Measuring something changes it. A contract price doesn’t just reflect who will win, it can nudge that outcome.
Then there’s good ol’ fashioned insider trading.
A trader called AlphaRaccoon won over $1 million by correctly predicting 22 of 23 Google Year in Search outcomes. Um… How did he do that? Before Maduro’s fall in Venezuela, an anonymous bet netted nearly half a million dollars on a suspiciously well-timed political position. On Discord, traders have a phrase for when something smells off:
the market is “insidered.”
In financial markets, insider trading costs people money. In political markets, it costs democratic legitimacy. Someone with access to internal campaign intelligence could profit enormously and simultaneously move the market in ways that reshape coverage and voter psychology. The feedback loop is real and it is not being seriously regulated.
(I smell a rat.)
Polymarket’s blockchain design makes this harder to fix. Permissionless settlement means geographic enforcement is basically theoretical. Nothing is stopping foreign governments from taking anonymous positions on U.S. elections. That should bother people more than it does. It certainly bothers me.
As a game designer, the gamification piece concerns me too. Push notifications. One-click deposits. Live markets on everything, around the clock, engineered for engagement. We’ve combined the addictive UX of mobile tech with the worst instincts of human behavior. Former CFTC Commissioner Kristin Johnson said we’re asking a commodities regulator to police democracy. Michael Lewis called it “especially predatory toward young men.”
The platforms will likely win most of the regulatory fights. Volume will keep climbing. We’ve decided the wealth creation, however misaligned, is worth it. Hayek believed in open markets where everyone contributes. He didn’t speculate on what happens when insiders get the scoop.
My hope? Within five years, someone draws a hard line between event contracts on sports and economics and event contracts on elections. The political risk is too specific, too consequential, and too easy to abuse to stay inside a framework built for commodity futures.
So next time you see “markets give Candidate X a 71% chance of winning,” remember what that actually is.
A financial derivative. Potentially traded by foreign actors. Optimized for volume. Running on infrastructure designed by an economist who imagined copper and soybeans and not the speculative lives of our phone addicted kids.
Not a crystal ball. A market.
Hayek was right that markets are the best information machines we have. He just never had to wonder what happens when you point them at democracy.
