Prediction markets are no longer a niche curiosity. With platforms like Polymarket and Kalshi attracting billions in trading volume and intense regulatory scrutiny, questions around integrity and consumer trust are coming sharply into focus. We hear from Shmulik Segal, Founder and CEO of Media Troopers (pictured above), to understand what this rapid growth means for the wider betting ecosystem, and why sportsbooks may be better positioned to restore confidence in the space.
Prediction markets have seen rapid growth in recent years, with the big players Polymarket and Kalshi being at the forefront of the trading craze. Both operators have seen rather big influxes in revenue as of late. In November, the two operators signaled a combined $8 billion in generated trading volume.
On top of that, Polymarket secured public backing from the owner of the New York Stock Exchange, Intercontinental Exchange, in October of last year, receiving a $2 billion investment that brought its valuation to approximately $8 billion. 
Kalshi, not wanting to be outdone by its biggest rival, raised $1 billion in a Series E funding round in December, which saw major backing from various investor firms, bringing the operator’s valuation soaring past $11 billion.
Prediction markets have also been seeing growing interest from the Trump Administration. Donald Trump Jr. was named as a strategic advisor to Kalshi just over a year ago. At the same time, Polymarket also appointed the President’s son to its advisory board in August, ahead of its anticipated US return.
The popularity of prediction markets is a testament to the betting industry. Sportsbook operators have also been taking a crack at expanding their operations to include contract trading. But scrutiny of these platforms is also high, while consumer and integrity trust in prediction markets is dwindling, people may look to sportsbooks as a safer alternative.
Integrity Risks with Prediction Markets
The past year saw an increasing number of legal crackdowns on the operation of prediction markets. Various states, including Nevada, Maryland, New Jersey, and Massachusetts, have issued cease-and-desist orders to the likes of Kalshi and Polymarket.
In January, Tennessee issued a cease-and-desist order, but it was later temporarily blocked by a federal judge, granting Kalshi a reprieve to continue operating in the state. The operator argues that, as it’s regulated at the federal level by the Commodity Futures Trading Commission (CFTC), its sports-event contracts do not fall under state gambling laws.
Polymarket CEO Shayne Coplan, in an exclusive interview with Axios in November, also said that it was only a matter of time before the Supreme Court ruled on the legality of prediction markets.
The Risk of Insider Trading
While prediction markets continue to battle states on issues surrounding legislation, they were also flung into the spotlight over accusations of insider trading. A Polymarket user earned over $400,000 after trading on the outcome of then-President of Venezuela, Nicolás Maduro, just moments before US intervention.
This led to calls from various US lawmakers, including Congressman Ritchie Torres, who announced that he would introduce a bill that would ban insider trading on market contracts that contained information not publicly available.
Consumer Trust in the Industry
Consumer trust is crucial to operators and businesses. Sportsbook operators have been building a public image in which their users can have confidence in their operations.
Sportsbooks hold themselves to higher standards, implementing safeguards such as partnering with sporting franchises and athletes, maintaining integrity by complying with anti-money laundering regulations, and introducing responsible gambling measures to help those fighting addiction, thereby solidifying their position against unregulated alternatives.
While worries can rise, sportsbooks are a reliable way to bring integrity to prediction markets.
Conclusion
According to the Financial Times, prediction platforms already make up to 8% of the sports betting industry.
If sportsbooks want to create a genuine crossover between the two industries, then it must be said that building up an environment where integrity checks are at the forefront, to protect consumers and their interests, is the way to go.
