What Are Prediction Markets and Why Are They Growing?
Prediction markets are online platforms where users can buy and sell contracts based on the outcome of real-world events. These events range from politics and world news to pop culture and sports. In the sports world, prediction markets have become especially popular, allowing users to trade contracts on outcomes like who will win a game or whether a player will transfer schools. Unlike traditional sportsbooks, where users bet against the house, prediction markets let users trade contracts with each other. The platforms earn revenue through transaction fees, similar to how a stock brokerage works. This model has attracted a new wave of users, especially younger adults, and has led to a rapid increase in trading volume.
The recent surge in prediction market activity is driven in part by college students and teens, particularly those aged 18 to 20. These users are often too young to legally gamble in most states, where the minimum age for sports betting is 21. However, prediction markets are available nationwide to anyone 18 or older, filling a gap in states where online sports betting is illegal or restricted. This accessibility has made prediction markets a popular alternative for young adults seeking to engage with sports outcomes.
NCAA Raises Alarm Over Collegiate Prediction Markets
The NCAA has taken a strong stance against the rapid growth of prediction markets, especially those involving college sports. On Thursday, NCAA President Charlie Baker sent a formal letter to the Commodity Futures Trading Commission (CFTC), the federal agency that oversees prediction markets, urging it to suspend all collegiate prediction markets until stronger safeguards are in place. Baker’s letter expressed deep concern that the expansion of these markets threatens both the well-being of student-athletes and the integrity of college sports competitions.
Baker outlined several key areas where he believes additional protections are needed. These include age restrictions to prevent underage participation, advertising limitations to reduce exposure and potential exploitation, enhanced integrity monitoring systems, and the involvement of national governing bodies like the NCAA in oversight. He also called for restrictions on proposition bets, the provision of harm reduction resources, and the implementation of anti-harassment measures. The NCAA’s position is clear: without robust safeguards, the risks to student-athletes and the integrity of college sports are too great.
Kalshi and the Controversy Over College Sports Trading
A major flashpoint in the debate over prediction markets is the company Kalshi, which has become a leading platform in the space. Kalshi recently self-certified with the CFTC to offer markets related to whether college athletes would enter the transfer portal. Although no immediate trading was planned, this move drew sharp criticism from the NCAA. The organization argued that allowing trading on such sensitive topics could lead to ethical issues and potential exploitation of student-athletes.
Kalshi’s approach highlights the unique nature of prediction markets. Unlike sportsbooks, which are regulated on a state-by-state basis and must undergo rigorous licensing, prediction markets claim federal oversight through the CFTC. This has led to legal disputes between state gambling regulators and major prediction market companies over jurisdiction and regulation. Some states and consumers have even sued these companies, alleging they operate as illegal, unlicensed sportsbooks.
Why Are Young Adults Flocking to Prediction Markets?
The appeal of prediction markets to young adults is clear. Platforms like Kalshi and Polymarket allow anyone aged 18 or older to participate in most trades, except for certain sports-related ones. This lower age threshold, combined with the ability to trade on a wide range of outcomes, has made prediction markets especially attractive to college students and teens. Data from Hold Crunch, a firm founded by a former FanDuel executive, shows that Kalshi is seeing more trades on college football than on NFL and NBA games combined.
In states without legal sports betting, such as California and Texas, prediction markets have gained significant traction. According to Juice Reel, an app that tracks sports gambling activity, 9% of its California users and over 6% of its Texas users have connected prediction market accounts. Even in New York, where online sports betting is legal, prediction markets remain popular, likely due to the state’s high tax rate on sportsbooks and the presence of financial traders familiar with futures and options trading.
Skilled bettors are also drawn to prediction markets because traditional sportsbooks often limit bet sizes for experienced gamblers. While regulated sportsbooks account for 70% of bets tracked by Juice Reel, they only represent 38% of total money wagered. In contrast, prediction markets make up just 1% of bets but contribute about 13% of the total handle, indicating that users are placing larger wagers on these platforms.
Regulatory and Integrity Concerns
The rapid growth of prediction markets has raised serious questions about regulation and integrity. Unlike sportsbooks, which are subject to strict state oversight, prediction markets operate under a patchwork of federal and state rules. The CFTC provides some oversight, but many platforms lack the robust review processes found in regulated sportsbooks, such as geolocation tracking and mandatory reporting of integrity issues.
The NCAA has criticized this lack of oversight, arguing that it leaves student-athletes vulnerable to exploitation and harassment. Baker’s letter to the CFTC called for the development of protections similar to those required for legal sportsbooks. These would include age verification, advertising restrictions, and enhanced monitoring for suspicious activity. The NCAA has also expressed a willingness to collaborate with the CFTC to create a safer environment for all participants.
Major sports leagues have taken varied approaches to prediction markets. The NFL has voiced concerns before Congress and explicitly bans its players from endorsing prediction market companies. The PGA Tour has a similar policy, stating that endorsement deals involving prediction markets are “not an approved category.” In contrast, the NHL and LIV Golf have entered into partnerships with Kalshi and Polymarket, signaling some acceptance within parts of professional sports. However, the overall trend among major U.S. sports leagues is one of caution, with many organizations citing regulatory uncertainty and integrity concerns.
Industry Response and the Path Forward
The Coalition for Prediction Markets, which includes major operators like Kalshi, Crypto.com, Robinhood, Coinbase, and Underdog, has responded to the NCAA’s concerns by expressing a willingness to work with regulators to establish safe and fair rules. The coalition argues that well-regulated prediction markets can protect players and consumers while avoiding the risks associated with unregulated offshore alternatives. They point to the example of Polymarket’s prior U.S. ban as evidence of the dangers of pushing users toward less regulated platforms.
Despite these assurances, the debate over prediction markets is far from settled. The NCAA’s call for a federal suspension of collegiate prediction markets has brought the issue to the forefront of national attention. At the 2026 NCAA Convention, Baker publicly reiterated the need for federal intervention, citing the unregulated betting risks posed by these markets. He emphasized that federal regulators must act to stabilize this emerging market segment and protect the integrity of college sports.
The Future of Prediction Markets in Sports
As prediction markets continue to grow, the pressure on regulators and sports organizations to address the associated risks will only increase. The NCAA’s actions have set the stage for a broader debate over how to balance innovation with the need for strong consumer protections. The outcome of this debate will shape the future of prediction markets in the United States and could have far-reaching implications for the sports industry as a whole.
For now, the NCAA’s call for a suspension of collegiate prediction markets marks a turning point in the conversation. It highlights the urgent need for clear rules and effective oversight to ensure that the benefits of prediction markets do not come at the expense of student-athlete well-being or the integrity of college sports. As federal and state regulators consider their next steps, all eyes will be on how the industry responds and whether meaningful safeguards can be put in place.
Conclusion: A Critical Moment for Prediction Markets
The rise of prediction markets represents a major shift in how Americans engage with sports and other real-world events. These platforms offer new opportunities for users to test their knowledge and potentially profit from their insights. However, the lack of consistent regulation and the involvement of young adults and student-athletes have raised serious concerns among sports organizations and regulators.
The NCAA’s recent actions underscore the need for a careful and coordinated response. As the debate continues, the future of prediction markets will depend on the ability of regulators, industry leaders, and sports organizations to work together to create a safe and fair environment for all participants. The coming months will be critical in determining whether prediction markets can fulfill their promise without compromising the values and integrity of American sports.
