GoKawiilIn late May, federal authorities charged a Google software engineer with insider trading after he won $1.2 million on the prediction-market website Polymarket. The 36-year-old Michele Spagnuolo allegedly placed bets that musician D4vd and rapper Kendrick Lamar would top Google's most-searched list. The bets paid off, prosecutors said, because Spagnuolo had access to confidential company data.
The popularity of prediction markets, where you can bet on thousands of real-world outcomes across nearly every facet of modern life, is spreading faster than governments can keep up. Even Mark Zuckerberg, Meta's chief executive, is reportedly developing a standalone prediction market app to compete with the most popular platforms, Kalshi and Polymarket.
You may have even been tempted yourself to put down cash on your favorite pop-culture hunch. But the recent Google case highlights just one of the biggest concerns for a multibillion-dollar industry prone to abuse. Numerous insider trading cases have prompted federal regulators to intensify scrutiny, cracking down on the illegal use of classified information for betting.
A New York Times investigation in May flagged more than 11,000 Polymarket accounts for suspicious, high-profit trading patterns, often involving perfectly timed bets on geopolitical events, and flawless, loss-free track records. And it's not just corporate employees; it's also military personnel and government officials manipulating classified information.
With Polymarket, users trade shares using cryptocurrency to bet on the outcomes of real-world events. Adobe Stock
A US Army special forces soldier allegedly received a payout of $400,000 by "predicting" the capture of Venezuelan president Nicolas Maduro. Former Congressman George Santos allegedly won tens of thousands of dollars by betting he wouldn't be at Trump's State of the Union address, despite posting on X that he would be.
Just last week, a Wall Street Journal investigation revealed that Polymarket ran a deceptive, secret marketing campaign by paying social media influencers to film fake trades and stage massive winnings on lookalike dummy websites to draw people in.
"This industry is growing fast and will continue to grow as long as courts and regulators allow it," Columbia University professor of economics Rajiv Sethi told CNET.
People generally have strong opinions surrounding prediction markets, and many (like me) feel a bit icky about them. But how the industry shakes out will depend on several regulatory battlegrounds. Prediction markets are facing intense pushback from lawmakers over insider trading, highlighted by a congressional probe and a proposed bill to ban prediction-market bets by service members. Yet because no one can agree whether betting markets are legitimate financial tools or just a glorified form of gambling, they're causing a massive headache at the state and federal levels.
Kalshi lets users trade contracts on events ranging from politics and economic data to weather and sports. Adobe Stock
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