What Are Prediction Markets and Why Are They Gaining Attention?
Prediction markets are online platforms where users buy and sell contracts based on the outcome of real-world events. These events can include political elections, sports games, and even entertainment awards. The core idea is that the price of a contract reflects the collective belief about the likelihood of a specific outcome. For example, if a contract on a team winning a game is trading at 70 cents, the market believes there is a 70% chance that team will win. These markets have grown rapidly in recent years, especially as new technology and regulatory changes have made them more accessible. Platforms like Kalshi and Polymarket have become household names among those interested in event-based trading.
MLB’s Memo: A Warning to Players About Prediction Markets
On August 2025, Major League Baseball (MLB) sent a memo to all its players, warning them that the league’s strict anti-gambling rules also apply to participation in prediction markets. The memo, titled “Re: Baseball Related Prediction Markets,” was issued by MLB Commissioner Rob Manfred’s office and the players’ union. It explicitly prohibited players from engaging with baseball event contracts on platforms such as Kalshi, Polymarket, and others. The league considers participation in these markets a violation of its longstanding sports betting policies, even though some prediction market operators claim they are not gambling companies.
How Prediction Markets Differ from Traditional Sportsbooks
Unlike traditional sportsbooks, which set odds and profit from the difference between bets placed on each side, prediction markets operate on a peer-to-peer model. Users buy and sell contracts from each other, and the price is determined by supply and demand. This means that market sentiment drives the odds, not a bookmaker’s calculations. Some platforms, like Kalshi, are federally regulated by the Commodity Futures Trading Commission (CFTC), while others, such as Polymarket, have operated offshore using cryptocurrencies to avoid certain legal restrictions. This regulatory gray area has allowed prediction markets to thrive even in states where sports betting remains illegal.
Regulatory Tensions: Federal vs. State Oversight
The regulatory environment for prediction markets is complex and evolving. The CFTC regulates some platforms as financial exchanges, which allows them to operate in the U.S. even where sports betting is not legal. However, states like Nevada, with a long history of strict gaming regulation, view these markets as a potential threat to their established casino and sportsbook industries. Nevada regulators have warned that prediction markets could undermine consumer protections and the integrity of the gaming industry if left unchecked. Legal battles are ongoing, with Nevada seeking to block operators like Kalshi from offering their products in the state.
Why Did MLB Take Action Now?
The timing of MLB’s memo is significant. In recent months, platforms like Kalshi have launched new markets focused on baseball events, and trading volumes have soared. For example, from August to December 2025, Kalshi reported over $14 billion in total trading volume, with a significant portion related to NFL and MLB contracts. The league is concerned that players or employees could use inside information to profit from these markets, potentially threatening the integrity of the game. The memo included examples and screenshots from Kalshi dating back to May 2025, showing that the league has been monitoring these platforms closely.
How Are Other Sports Leagues Responding?
Other major U.S. sports leagues have taken varied approaches to prediction markets. The National Hockey League (NHL) has signed deals with both Kalshi and Polymarket, embracing the new technology as a way to engage fans. The National Football League (NFL) has expressed concerns about the lack of regulation and the similarity of prediction markets to traditional sports betting. The National Basketball Association (NBA) is currently dealing with a gambling scandal and has asked the CFTC for regulatory provisions to protect game integrity. These differing responses highlight the uncertainty and debate surrounding prediction markets in the sports world.
Inside the Platforms: Kalshi, Polymarket, and More
Kalshi is considered the industry standard for regulated prediction markets in the U.S. Founded by former Goldman Sachs traders, it offers a wide range of markets, including politics, sports, economics, and entertainment. The platform is user-friendly and appeals to both beginners and experienced traders. Polymarket, on the other hand, is known for its fast-moving, crypto-based trading and has gained popularity for covering a broad array of topics. After facing regulatory hurdles and a temporary ban in the U.S., Polymarket recently re-entered the market by acquiring the necessary licenses. Other platforms, such as Novig and Crypto.com, are also gaining traction, each offering unique features and targeting different user bases.
MetaMask and the Mainstreaming of Prediction Markets
In December 2024, MetaMask, the world’s largest Ethereum wallet, integrated prediction markets directly into its app through a partnership with Polymarket. This move allows MetaMask’s 30 million monthly users to bet on real-world events without leaving the app. The integration supports “one-tap funding” from various Ethereum-compatible blockchains, making it easier than ever for users to participate. This partnership marks a major step toward mainstream adoption of blockchain-based forecasting tools, as it brings prediction markets to a much wider audience.
Concerns Over Game Integrity and Consumer Protection
One of the main concerns raised by MLB and other regulators is the potential for prediction markets to compromise the integrity of sports. Unlike traditional sportsbooks, prediction markets are not always required to share data on unusual betting activity with leagues or regulators. This lack of transparency makes it harder to detect and investigate suspicious behavior. MLB Vice President Bryan Seeley has highlighted the need for better protections at the state level, including requirements for exchanges to notify leagues about threats to game integrity and to cooperate in investigations. Some exchanges argue that current regulations do not permit them to share information, further complicating enforcement efforts.
Recent Scandals and the Importance of Monitoring
The risks associated with prediction markets are not just theoretical. In a recent case, an investigation into Cleveland Guardians pitcher Luis Ortiz was triggered by an alert from a betting-integrity firm. Ortiz now faces wire fraud conspiracy charges and is on leave pending league and federal investigations. This case underscores the importance of monitoring betting activity and sharing data between platforms, leagues, and regulators. Maintaining the integrity of sports is crucial for the continued growth of both traditional and emerging betting markets.
The Economic Impact and the Future of Prediction Markets
Prediction markets are not just a regulatory challenge—they are also big business. The Dallas Cowboys, for example, are the most popular team on Kalshi, with over $216 million wagered on them to win or cover the spread in the 2025 NFL season. The total trading volume on Kalshi for NFL contracts alone reached $3.8 billion in just a few months. These numbers highlight the growing influence of prediction markets in the sports world. As more platforms enter the market and trading volumes increase, the economic impact will only grow.
State-Level Pushback and the Casino Industry’s Concerns
Not everyone is enthusiastic about the rise of prediction markets. Nevada regulators have voiced strong opposition, warning that the expansion of prediction markets could threaten the state’s casino industry. They fear that if prediction markets move beyond sports and into casino-style games, it could undermine decades of regulatory standards and consumer protections. Lawmakers in Nevada are considering new laws to address these concerns, including measures to prevent money laundering and tax evasion. The debate over how to regulate prediction markets is likely to continue for years to come.
How to Get Started with Prediction Markets
For those interested in participating, signing up for a prediction market app is straightforward. Users should research platforms carefully, create an account, and complete any required identity verification. Funding accounts can be done with traditional currency on regulated sites or with cryptocurrency on others. It is important to start small and only invest what you can afford to lose. Many platforms offer referral bonuses and other incentives to attract new users. Monitoring your positions and staying informed about news that could affect market prices is key to success.
The Road Ahead: Regulation, Innovation, and Mainstream Adoption
The story of prediction markets is still being written. As platforms like Kalshi and Polymarket continue to innovate and attract new users, regulators and sports leagues are working to adapt. The balance between innovation and integrity will shape the future of this industry. With major players like MetaMask, DraftKings, and even the New York Stock Exchange’s parent company investing in prediction markets, mainstream adoption seems inevitable. The coming years will determine how these markets are integrated into the broader financial and gaming landscapes.
Conclusion: A New Era for Sports Betting and Event Forecasting
The recent memo from MLB to its players marks a turning point in the relationship between professional sports and prediction markets. As these platforms become more popular and influential, the need for clear rules and effective oversight becomes more urgent. Prediction markets offer exciting opportunities for fans, traders, and investors, but they also pose new risks that must be managed. The ongoing debate among leagues, regulators, and industry leaders will shape the future of sports betting and event forecasting in the United States and beyond.
