What happens when you can bet on anything?

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Prediction markets have long been an under-the-radar way to bet on politics, sports and pop culture. Now, platforms like Kalshi and Polymarket are going mainstream. Why are they getting so popular, and how could they impact the way we predict the future?

Robin Hanson, economics professor at George Mason University. A long-time scholar, advocate and inventor in the world of prediction markets.

Ben Schiffrin, director of Securities Policy at Better Markets, a nonprofit advocating for consumer protections and greater accountability for financial institutions.

Max de Groot, a Dutch Polymarket trader.

Cole Wogoman, director of Government Relations and League Partnerships at the National Council on Problem Gambling.

The version of our broadcast available at the top of this page and via podcast apps is a condensed version of the full show. You can listen to the full, unedited broadcast here:

Part I

MAX de GROOT: Yeah, I make quite a lot of trades. Like 500 a week.

MEGHNA CHAKRABARTI: 23-year-old Max de Groot is indeed a trader. He also happens to be an aspiring doctor. He’s a med student in the Netherlands. But for about 25 hours every week – more than half the working week if he had a job – he makes trades … not on any conventional stock market. Max trades on something called prediction markets.

de GROOT: I joined around the time of the election and one thing I found very entertaining was Trump mention markets. So basically, the idea is that you bet on what Trump will say, which is quite stupid. But it's actually quite active. And at first of course I made some losses, but then after a while I got a bit better. And you kind of start knowing what kind of things he talks about and such. But yeah, it's a very weird thing to predict on. But on Polymarket it's possible.

CHAKRABARTI: Weird, for sure. But growing rapidly. Prediction markets let people place bets on future events – from how many touchdowns your favorite wide receiver will catch, to how many albums Taylor Swift’s latest release will sell, to where the biggest betting market of all, the stock market, will close tomorrow. Or, as Max said, what will President Trump say next.

de GROOT: Words could be like Kamala. Or like Make America Great Again. Words, it's like that. Words like that. And words like Make America Great Again would hit almost every time.

CHAKRABARTI: So once again, we're talking about something called prediction markets. They treat possible future outcomes like a share. The price out of a dollar representing the given odds something could happen. So if there’s a 60 percent chance that Trump would say the word “China,” the price would be 60 cents. If you bet that he will and he does say it, you win a dollar. If you lose. Nothing.

Often, betting on something obvious wouldn’t win Max much money. But every once in a while, he goes against what the crowd was thinking. Take June of this year, when this question hit Polymarket - “Will Tesla launch a public driverless Robotaxi service before July?”

de GROOT: Elon Musk actually made a post about it and he said, ‘money making opportunity.’ So what happened was even though it looked like a no, people saw the Tweet and they thought, well, money making opportunity. So they just bought a ton of, Yes. And the odds went from like 10% to as high as maybe 70% or something. I bet against the hype because I knew or I had a good suspicion that it would not be public.

Because with regulations and such, they cannot just launch a public robot taxi service. And yeah, I just assumed that Elon was wrong, and he did not know about the rules. And it turned out I was right. At that point I just realized that I can actually make money doing this.

CHAKRABARTI: Polymarket is one of the biggest prediction market platforms. Max estimates his gambles on Polymarket have made him enough money to cover his living expenses for the next three years. He now scours the news, X and online platforms looking for an edge every day. Some days, he’s taken bad losses, as much as 3,000 euros on a single bet. But the goal always is just to win more than you lose.

de GROOT:  So I think a large portion of the people are quite, well, they don't have much self-control and they just make quite bad decisions. So I would just say that by being informed and making calm decisions, you're already ahead of the curve.

CHAKRABARTI: Polymarket and other prediction market platforms like Kalshi or Robinhood have been a niche interest for years. That changed in the 2024 election when they took off.

CLIP 1: Big night for prediction markets in calling President Trump as the winner at the polls. The presidential election contracts on Polymarket, Kalshi and interactive brokers – Robinhood – all indicated that Trump had a wider lead over Vice President Harris than the traditional polls.

CLIP 2: People traded over 3.6 billion dollars on the U.S. presidential election market. Making it the largest election betting market ever by volume.

CLIP 3: Robinhood’s prediction markets have now crossed four billion events contracts traded. With more than half of that volume happening in Q3 alone.

CLIP 4: Prediction market Kalshi has closed a series C funding round that brings the company’s valuation to 2 billion dollars.

CLIP 5: Polymarket is considering a deal that would value the company at 9 billion dollars. The number is a dramatic climb from the 1 billion dollar valuation just 3 months ago.

CHAKRABARTI: Kalshi says its user base has grown fifteenfold in the past year alone. Its trading volume has grown to a billion dollars every single week – that’s from not ever having moved that much money before, in the company’s prior history. Founder Tarek Mansour claims that prediction markets are about more than making money – they are, he told a TechCrunch crowd in April, a place to predict the future.

MANSOUR: You have this notion of you're aggregating the wisdom of the crowds and you're having people with real skin in the game being paid to forecast the future. So, it's just making us all smarter about the future and that felt like a very worthwhile thing to build.

CHAKRABARTI: The tech bro bullishness is indeed exciting, and alluring to millions of people. Particularly young men. But the geometric growth of prediction markets, both globally and in the U.S., is now forcing questions such as – how are these things legal? Should they be regulated? And perhaps more broadly, how does life change when you can gamble on virtually anything? We'll start with Robin Hanson, he’s an economics professor at George Mason University. He’s been involved in the prediction market space for decades as a scholar, inventor and advocate.

Professor Hanson, welcome to On Point.

ROBIN HANSON: Great to meet you.

CHAKRABARTI: Now, by the way, we want to say that the reason why we're doing this right now is that Polymarket, which I mentioned a couple of times there. It has technically been banned for U.S. citizens, but recently announced that it is set to reenter the U.S. market after acquiring a CFTC license exchange earlier this year.

So we'll talk about that in a moment, but that's the thing that's really set to maybe mainstream prediction markets. First and foremost, Professor Hanson. Since you are an advocate and inventor for prediction markets, let me just check about any potential conflicts of interest. Are you an investor or owner in any of these major markets?

HANSON: Certainly not for the any one. As you mentioned, I'm an advisor for some small crypto firms that you might not have heard of, but none of these.

CHAKRABARTI: Okay, great. So how do they work? Are they markets, are they fancy casinos? I'd like to understand in much more detail how these things work.

HANSON: Sure, they are just betting markets.

So if you've ever made a bet or heard about people making bets, that's what these are. They are betting markets where you buy and sell assets, and that's what most financial markets are. That is you can actually gamble in most financial markets, stock currency, commodity options, et cetera. And there's just an asset like a stock.

But here it's an asset that pays off. As you said, if an event happens. And it pays zero if the event doesn't happen, it pays $10, say, if the event happens, and then there's a current price, might be $6 as you mentioned, and then you have to decide, is that price too high or too low? You want to buy low, sell high, and afraid of buying high, selling low.

CHAKRABARTI How are the assets priced?

HANSON: There would, at any one moment, be some offer somebody had made to buy and sell it. The selling offer would be higher than the buy offer. And at any one moment you could take one of those offers or you could put one of your own offers in. And then the prices are just whatever offers are taken.

So the prices are just the effect of people making offers and taking them.

CHAKRABARTI: Okay. So this is different than, say, traditional sports betting where they're setting odds and that's not how this is working.

HANSON: With a bookie, they will tell you the odds, but they're trying to be what's called a market maker.

Most actual financial markets have what are called market makers. They're the people trying to set these prices so they can be the middleman. If there's no middleman, then you have to go make an offer and wait a while for someone else to take the offer. And in that time, stuff might have changed. It's a lot of work.

So market makers sit in the middle there for you. They're just immediately ready to make a trade for you, and they're planning to take your trade and then flip it to somebody else in a few minutes.

CHAKRABARTI: Okay. I'm still. Maybe the math. Let's dive into the math a little bit more, because again, in terms of the simple let's take the Trump example.

If, let's say I look at Polymarket right now. I'm making this up. I don't actually know if this question is on the platform at the moment, in the next speech that President Trump gives, will he say the words like radical liberals? Per, my guess is that the chance is pretty much absolutely 100%.

HANSON: Could be.

I don't actually track that.

CHAKRABARTI: But again, so like ... is it just like the percentage of people who think yes. And that helps set that prediction value?

HANSON: It's not about the percentage of people. No. So it's just people go around looking at all these prices and they ask which prices look wrong?

Like the person who talked to us about at the beginning of the episode, right? He's going around looking for prices that look wrong. Most of them he doesn't wanna disagree with, leaves him alone. When you find a price you think is wrong, then you either buy or sell. To fix it. If you think the price is too low, you buy, that pushes up the price a bit and you expect to make money if you're right.

And then when nobody fixes the price it, they just leave it and then the price stays there. So the price is just this consensus of all the people saying, no, I don't want to change that. I don't feel confident enough to move that price. I don't think it's wrong, so I'm going to leave it be. So the price sits in the middle of what people are willing to change.

CHAKRABARTI: Okay. So that gets us, we'll talk about this in a few minutes about the skin in the game aspect of this, but just, I'm a big concrete examples person, so let's stick with my theoretical, Will Trump say radical leftists?

HANSON: Right. So say the price is 90%. That's your judgment, right? If you look at the price and it says 90%, you'd say, I don't disagree with that.

You'd leave it alone, right? If it said 20%, you'd go, no, that can't be right. Now, you might first say, what do they know that I don't know? And do some research. You might be a bit of a fool to just jump in with your initial conception there, but if you do a little research and you still think, no, that can't be right, then you should buy.

CHAKRABARTI: Okay. So let's say I do think it's right, the 90%, and so I place a bet on that. And I pay 90.

HANSON: Yeah, that's dumb. Don't do that.

CHAKRABARTI: But if I pay 90 cents, I want to know if I'm understanding this right or wrong. If I pay 90 cents on the bet. And then he does indeed say radical leftist, that I get a dollar back.

I've only won like 10 cents.

HANSON: 10 cents. But then for every nine times you do that one time, you're going to lose and lose the 90 cents, and on average you're not going to make any money.

CHAKRABARTI: I got it. Okay.

Part II

CHAKRABARTI: Now, Professor Hanson, you said a little bit earlier that prediction markets are, like other markets, say the stock market, that they're functionally equivalent. But I wonder if I could argue that purposefully, they are not equivalent. Because in the purest sense, a stock market, The Dow, for example, on the primary market, when investors buy in, say, I'm buying in shares of Disney.

I'm just throwing a company out there, or company X, the reason why those shares are even offered to begin with. In the purest sense, again, is so that capital can flow to that company, which then they in turn can invest in growth so that the company itself can actually grow and return the benefits of that growth to investors.

Now, it works differently on the secondary market where people are in fact betting for and against how share prices will move. But I would argue that in prediction markets, you're not helping anything grow. There's no overall economic benefit to prediction markets.

HANSON: You said the secondary market doesn't do this capital allocation function.

What it does is estimate the value of the company, and that informs the company and investors about whether more capital should be allocated. So it assists in that function, but via information. So the world is full of choices we make that information could help with. And prediction markets can help with many of those choices.

But there are certainly many of the markets you have mentioned that don't seem to be helping anybody make decisions. And so they don't seem to have a benefit. Maybe we could just say those people are having fun and we should let them enjoy. They're fun. But there are markets that have outside consequences.

Like one of the more popular markets on Polymarket and Kalshi, I believe are estimating which AI companies, AI products will pass what performance metrics, which will be the best by the end of the year, for example. That matters a lot for the AI industry and those markets are telling people, informing them, collecting information and putting together in a price that tells us things that are valuable for decisions we make.

CHAKRABARTI: Okay. So point taken. It can provide another kind of signal, let's put it that way that can in inform folks who are making important decisions. But you do concede that at least there's no equivalent to the primary market when it comes to the conventional stock market in terms of economic benefit.

HANSON: Most financial market analysis distinguishes a hedging function, i.e. a reallocation of risk and capital from information functions. And I'm happy to say some of these markets are doing less hedging and more informing, although even say markets on the election, some people have risks with respect to the election and one guy wins and they will do better than if the other person wins and they can hedge that risk in the election markets.

It's just a smaller function there.

CHAKRABARTI: Okay. But behind all this though is the presumption of accuracy. I was about to say, are you willing to bet professor how accurate?

HANSON: I might, yes. ... So make me an offer.

CHAKRABARTI: So tell me why how do we judge their accuracy?

HANSON: So we've had decades of academic research that's compared financial market prices to other things. Estimating the same thing at the same time with similar people and resources. A lot of this research. And the consistent answer is financial markets are just more accurate. Or about the same as the other mechanisms you would use at the same time for the same thing.

That's their superpower. They're just excellent at aggregating information. That doesn't mean they don't make mistakes. Like we've had markets on who's going to be the next Supreme Court justice nominee or something. And those things don't predict very well because they don't know very much. So you can't squeeze blood out of nothing.

We've had markets on who's going to be the next Supreme Court justice nominee or something. And those things don't predict very well because they don't know very much.

Robin Hanson

It's a mechanism for aggregating whatever information could be available to predict things, and it does better than the other mechanisms we've tried by comparison, but it's not perfect because it can only find out what we know.

CHAKRABARTI: Interesting. Okay. So it's another method of aggregating known information about a question, that makes a lot of sense to me.

But there's a difference in let's call it the elections space. Again, theoretically polls are supposed to work. We've had many shows about how they don't always perfectly work, but polling is supposed to work because they're supposed to take a representative snapshot of people who may vote in that election.

That's not what's happening on prediction markets that are making predictions about elections.

HANSON: No, but you want to distinguish a mechanism for aggregating different people's opinions from a dataset. So the poll is a dataset. From that dataset, people do statistical analysis to make predictions.

They can also do that from markets, use that as data to make predictions. And consistently we have compared those, and the markets are better at predicting when you use them as data. I don't know if you know that roughly a century or so ago, there was actually more money bet in presidential betting markets than was in the stock market at the time.

So betting markets were big for elections, roughly a century or so ago, and then that went away with the introduction of scientific polling.

CHAKRABARTI: Is that why betting on elections went away in the United States?

HANSON: They were also illegal at the time, so reporters like yourself would rather report on some legal source.

But that's one of the hopes for prediction markets is that can become more of a source for reporters when they write about topics. If there's a betting market estimate on it, then you should include that in your story.

CHAKRABARTI: Okay. On that point, I wanna say that we did reach out to Polymarket and to CCI and to the Commodities Futures Trading Commission.

Couldn't get anyone there on any of those places to agree to join us. Polymarket has a statement, or multiple statements across their website, which I will share with you in a moment. But on the legal side of things, on the regulatory side of things Kristen Johnson, who is the outgoing Commissioner at the Commodity Futures Trading Commission, she's actually sounded an alarm over prediction markets, and she spoke at the Brookings Institution just last month.

KRISTEN JOHNSON: As of today, we have too few guardrails and too little visibility into the prediction market landscape.

CHAKRABARTI: Johnson says the platforms are moving faster than regulators can keep up. Kalshi made headlines last year when it sought approval to list contracts on who will control Congress, effectively allowing regulated election betting in the United States.

The CFTC rejected that proposal, calling such contracts contrary to the public interest. Kalshi sued, and then something quite amazing happened. A federal judge sided with Kalshi. Saying the contracts do not violate the law. The CFTC dropped its appeal earlier this year.

JOHNSON: I'm disappointed, deeply disappointed that during my time at the commission, we were not able to successfully advance a final rule that addressed the introduction of political event contracts in our markets, or at least the flourishing of these contracts.

CHAKRABARTI: Meanwhile, Polymarket, which has technically been banned for American citizens is set to reenter the U.S. market after acquiring a CFTC license exchange earlier this year. And Johnson says it's critical that regulators protect mainstream consumers.

JOHNSON: I'd say that when we think about customer protections in most markets, they look pretty similar.

Don't lie, don't cheat, don't steal.

CHAKRABARTI: She's obviously suggesting that similar rules apply to prediction markets. Once again, that's former Commodity Futures Trading Commissioner Chairman Kristen Johnson, she spoke at the Brookings Institute just last month.

Now, as I said, the CFTC did not respond to our request for comment on this story, but acting chairman Caroline Pham has been pretty quiet about prediction markets, but the agency is clearly interested in growing this space because in a statement issued last month, Pham wrote with the chair of the Securities Exchange Commission in a joint letter that, quote:

The SEC and CFTC should examine opportunities to collaborate to consider where event contracts may be available to U.S. market participants regardless of where the jurisdictional lines fall.

CHAKRABARTI: End quote. Joining us now is Ben Schiffrin.

He's Director of Securities Policy at Better Markets. That's a nonprofit advocating for consumer protection and greater accountability for financial institutions. Ben, welcome to On Point.

BEN SCHIFFRIN: Thanks for having me.

CHAKRABARTI: So obviously you heard the former CFTC chair there raising some legal and regulatory concerns about prediction markets.

Do you share those concerns?

SCHIFFRIN: I do. I especially share those concerns when you're talking about event contracts in the prediction markets that relate to gambling on elections, which I think is where this whole brouhaha started, as you mentioned. I think that the law should be pretty clear that event contracts are impermissible when they violate state law.

As was just mentioned, state law prohibits gambling on elections. So it seems pretty clear to us that event contracts that allow people to bid on elections should not be permissible.

CHAKRABARTI: Okay, so tell me more about that. Because we once had a similar issue with sports betting, but obviously the horse has long left the barn on that.

Are we basically on the cusp of something similar with election law?

The Supreme Court legalized sports betting and now we seem to have an epidemic of sports betting addiction in this country.

Ben Schiffrin

SCHIFFRIN: ... I think the sports betting analogy is a good one. The Supreme Court legalized sports betting and now we seem to have an epidemic of sports betting addiction in this country. And I think if we could go back and do that, maybe we wish that we could, and I worry about the same thing happening in our elections. You see now that the major sporting leagues like the NBA and Major League Baseball are now having to investigate their participants that have gotten into trouble for participating in betting and calling into question the integrity of those sporting events.

And I worry about the exact same thing happening in the election context. The integrity of our election should be sacrosanct. And if we allow betting on them, people are going to question the validity of our elections even more than they do now.

CHAKRABARTI: Professor Hanson, let me let you chime in on this.

Obviously, elections is one of the primary areas of focus of the overt possibility of essentially corruption in a fundamental democratic system, if people are able to make bets on them. Do you share that concern?

The integrity of our election should be sacrosanct. And if we allow betting on them, people are going to question the validity of our elections.

Ben Schiffrin

HANSON: Not really. I think it's really unlikely that a senator's gonna throw the election to win a few bets.

No, they have so much invested in being candidates and trying to win that they're just not going to lie down and quit because there's some bets on the side, that's just implausible.

CHAKRABARTI: Implausible does not equal impossible. So okay, within, we'll come back to elections in a second.

What about, let's say, policymaking more broadly? I can imagine that there's a question right now on Polymarket, When will the government shutdown end? This is not an election, but it's definitely a policy question and it's definitely not outside the realm of possibility that lawmakers could be, we can imagine that they could be putting money into this, and they would know, okay, on this date, I'm actually going to make a final compromise.

And yep, that's the date that the government shutdown will end. It doesn't have to necessarily be directly elections. Policymaking is just as consequential, Professor Hanson.

HANSON: The amount of economic interest around the shutdown is enormous. There's many billions of dollars at stake for people wanting the shutdown to end earlier or later for various reasons.

The betting markets are just a tiny amount of incentive compared to all the other interests. Politics in general has enormous interests at stake.

CHAKRABARTI: Ben Shiffrin, I have to say, I'm quite buoyed by Professor Hanson's optimism about decision making in Washington. But I think we've seen in the past that definitely out of personal interest, policymakers have, or lawmakers have made decisions that have, in some cases, led them to jail for corruption.

So do you think that, as Professor Hanson is saying though, that broadly speaking members of Congress are, they have sufficient integrity to put the interests of the American people and the broader economic interests, say, of the functioning government before what sort of whatever minor benefit they could gain by betting on a place like Polymarket.

SCHIFFRIN: I don't think what we're talking about is policy making. I think what we're talking about is, as I said before, the integrity of our elections. And it may be that the person who is involved in the election may not be corruptible, but you have outside actors that will want to influence our elections, they already do.

And imagine if now there's a profit motive for them to do, although I will say in terms of the candidates themselves, Bill Ackman posted just a little while ago that Eric Adams should place a bet on it was either Polymarket or Kalshi for Andrew Cuomo and then dropped out. And then he could feel a lot better about doing so.

So it's already being discussed that the actors themselves could be influenced by the ability to bet on election. So I really don't think it's that implausible.

CHAKRABARTI: Okay. But on the flip side of things, Polymarket and Kalshi may offer these questions, but correct me if I'm wrong, Ben, but current U.S. law prevents people from betting on elections, does it not? Or am I wrong?

SCHIFFRIN: No, it does. There are numerous state laws that explicitly prevent betting on elections.

CHAKRABARTI: Okay. But not all states have those laws. There may be some that don't, but most states do.

CHAKRABARTI: Okay. But again, so to be clear, but is the backstop against the kind of corruption that you're concerned about already there?

If elections betting is illegal in this country?

SCHIFFRIN: The whole problem is that Kalshi and Polymarket want to find a way to make it legal to bet on elections by saying that what they're offering are these event contracts. But in essence what it really is just betting on elections.

CHAKRABARTI: Okay. Professor Hanson, since you've been in this space for a long time, as these companies really are experiencing so much explosive growth and they want to push even further into the U.S. market. What kinds of regulations do you think would be acceptable to Polymarket or Kalshi, et cetera?

HANSON: That's a question you'd have to ask them, but I think you're both missing the huge upside here. You're worried about a relatively minor downside, but our political system just faces huge information problems.

It's very hard for voters to figure out who to vote for because they don't understand the consequences very well. So betting markets could just directly give us those consequences. In the last presidential election, there were actually some websites that weren't exactly betting markets that were forecasting the consequences of whether the Republican or the Democrat won the election.

You can have betting markets give you estimates of the consequence of who you vote for, and that can be important information.

Robin Hanson

You can forecast consequences like for stocks or for oil prices, or for war deaths, or for COVID deaths or whatever else you want. You can have betting markets give you estimates of the consequence of who you vote for, and that can be important information. And that's on the one side. On the other side you're saying, oh, but the president might throw the election to win a few bets in Polymarket. That's crazy.

Part III

CHAKRABARTI: Ben, I have to say that we do have a statement from Kalshi, one of the big platforms about why they believe the platform should not be considered gambling and why it should be legal in all 50 states.

Their argument boils down to this, quote:

Kalshi is regulated at the federal level because we are a commodities exchange. And because we are an exchange, our product is very different from what traditional sports books offer. What's your response to that?

SCHIFFRIN: I don't think it makes any sense to say that the CFTC, the regulator for commodities that helps to regulate the prices of things like wheat and soybeans, is the right regulator for sports gambling, which is what Kalshi wants to do.

CHAKRABARTI: But they say that users can cash out of their positions at fair market prices. And so then that, quote, the fundamental difference is that sportsbook revenue is equal to customer losses. But on an exchange like Kalshi, the conflict of interest disappears. End quote.

I don't think it makes any sense to say that the CFTC .... [which regulates] the prices of things like wheat and soybeans, is the right regulator for sports gambling.

Ben Schiffrin

SCHIFFRIN: Yes, I know they say that they differ from sports books because you're not betting against the house, you're betting against other people, and they just earn their money by taking a transaction fee.

But from the perspective of the public, it's no different. And I would also point out that it's no different than going to a casino and playing poker where you're playing against other people, but the house takes a rake. So functionally what they're doing is allowing gambling on sports. And if you go to Kalshi's website, you'll see that it looks no different than the website's of FanDuel or DraftKings, where what you're being presented with is a sporting event, and you can either bet on one of the two teams to win.

CHAKRABARTI: Okay. So Professor Hanson, on a different point. My guess is, or my feeling is that underlying a lot of the belief in the power of prediction markets is also a general belief in the power of markets as a whole to be like very strong, as you said.

Ways to signal aggregate information or analysis of aggregate information. But that doesn't mean that markets always behave perfectly. Obviously. I know you'll agree with me on that. My mind keeps going back to 2006, 2007, and I know you're going to be like, why are you bringing up the housing market?

Because there, the belief was that we had the United States housing market, which was like the safest market in the world. It was supposed to be the safest bet in the world. And so the idea was let's build up more trading mechanisms, betting mechanisms, essentially, around the housing market. And through that largely unregulated process, we ended up with the housing market crash of 2008, and the response then was much more vigorous regulation.

What is to prevent similar financial engineering around prediction markets, or do I, am I just fundamentally misunderstanding how they work?

HANSON: The big picture here is that you are in a rich society because of centuries of experimentation with different kinds of technologies and social mechanisms that we try out.

Some of them don't work. Some of them, we reject. Others last. And we are now rich for that reason. Most financial markets that you know of were once illegal for gambling reasons. Stock markets, insurance markets, options markets, they were all illegal. Over time we tried different things and some of them we've kept because we've found them to be valuable.

So I will ... argue for trying more things here. If we can't find some customers that find it valuable, then I guess it should go away. But first, let us try many things. We've been limiting experimentation drastically over the last half century because of overregulating financial markets. Financial markets are 8% of the economy, and they could be more if we would invent more things.

CHAKRABARTI: Two things. One, the overregulation in your words has come because of massive market failures. Wouldn't it be better to have reasonable regulation to prevent the market failures in the first place?

HANSON: I'd say most of the failures have been relatively minor. Look, the 2008 crash, it was a failure of aggregating information and the first people who told you there was a crash were financial markets. They were the first place the information came from. Watch the movie, The Big Short, it'll show you.

It was financial market traders who forced, warned about the problem. We want these mechanisms to find problems and warn us about them. And that's what financial markets can do.

CHAKRABARTI: ... We're going down a different path. They were making bets against the housing market for sure. But that's not equivalent to warning society about the problem.

HANSON: They were warning that these prices were way too high. They were warning that the default rates were much higher than the market prices were estimating.

CHAKRABARTI: Let me jump to another thing. Because you said that stock markets were once illegal?

HANSON: Right.

CHAKRABARTI: Which ones?

HANSON: All of them.

CHAKRABARTI: When?

HANSON: You go back many centuries.

And there was a time before there were stock markets and they were illegal as gambling and it took years of pushing for exceptions and experiments to allow a wider use of such markets for financial, of firms getting capital. That wasn't a thing before markets were allowed.

CHAKRABARTI: I have to say, I read history a little differently here, and I think this is worth pursuing because again you're making a historical argument.

There were stock markets in ancient Rome, the Dutch had a stock market in, what, the 15th or 16th century. There were many shares sold in basically colonial companies during Europe and Britain's expansion across the globe. In the United States, I think the first stock market in the country was opened in Philadelphia.

They may in 17 something. I don't have the exact date, but they may have been unregulated, but they weren't illegal.

HANSON: The long-term history of financial markets is that we have been, had a lot of regulation of them and we've slowly relaxed regulation in particular areas that we've decided are valuable and we've kept regulation in other areas that haven't proved themselves to be valuable.

And so now we are having experimentation. These new prediction markets are trying to find markets, trying to find customers, looking for where they could make useful predictions, find customers interested in trading on them, and hopefully some of those will be value that we accumulate.

I'm especially interested in governance, prediction markets for governance can help organizations make key governance decisions.

CHAKRABARTI: I think healthy experimentation and expansion of markets is a good thing. Ideally, in my view, we would find a balance between allowing that experimentation, but also regulation. That in the words of the former CFTC chair, protects, especially retail investors.

I actually appreciate the exchange that we've had on this Professor Hanson. I wish we had more time to talk about it, but there's one last sort of major issue about any kind of expansion of, call it, market-based prediction, market betting or gambling or whatever you want to call it because their same set of concerns come up.

Every single time. And for that, we turn to Cole Wogoman at the National Council on Problem Gambling. Because for Cole, there's a deeper moral issue to consider.

COLE WOGOMAN: Functionally, this is gambling. And when you look, go on an app and look at how you place a bet on a team to win on one of these prediction market apps, the same way you would on DraftKings, FanDuel, BetMGM or whomever it's the same thing.

CHAKRABARTI: And Cole says, when people gamble, naturally, some folks develop addictions to gambling. It's estimated that two to 3% of American adults have mild or moderate gambling problems. Maybe they feel restless when they try to quit or they have to gamble more and more amounts of money to feel the same level of excitement, or maybe they even lie to people about their habits.

And then for an additional 1% of Americans, the gambling addiction is considered severe.

WOGOMAN: We see everything from bankruptcy to draining your child's college fund to stealing from loved ones to feed your addiction. Gambling addiction is the highest rate of suicide of any addiction.

Gambling addiction is the highest rate of suicide of any addiction.

Cole Wogoman

So a lot of people don't know that. But when we look at people who are in recovery from gambling addiction, one in five have made a lethal attempt on their life.

CHAKRABARTI: Cole says he doesn't think that prediction markets are necessarily more dangerous as a way to gamble. He does not think that, and he does not take a position on legalization of prediction markets generally, but he does think that when people log onto Polymarket or Kalshi, there should be more robust guardrails in place than there currently are.

WOGOMAN: You should be able to set a limit on how long you wanna be on the app before you get timed out. You should be able to set a limit on how much you wanna gamble. Maybe it's, whatever, a hundred dollars a day or whatever. You should be able to set a limit and you'll get stopped. If you exceed that limit, you should be able to easily access our website or our website like ours to get help if you realize you are having trouble stopping.

Those are the sort of things, and there's a bunch. But those are the sort of things that regulated gambling provides to a player that we advocate for, to prioritize player health. And right now, we're not seeing that in these prediction markets.

They're not being regulated at all, which we think puts players at high risk.

CHAKRABARTI: Cole also has concerns that prediction markets will simply expose more people to gambling who otherwise might not be interested in this kind of betting. Because on prediction markets, you can gamble on a lot more than just sports.

You can tailor your bets to your interests. Cole calls it the 'gamblification' of American culture.

WOGOMAN: At what point is everything going to be able to be gambled on? And is that okay? Is that what we want? Does that put, does that normalize it in a way that maybe isn't the best for society? It used to be that you had to go to a casino to gamble, and you knew you were going and taking a risk and potentially going to lose some money.

And now you could say that about sports betting apps where it's a well-known gambling activity, that you could, you're putting your money at risk, et cetera. But you know what happens when you can gamble on who's going to win a Grammy? And I don't have a hard answer to say that's going to cause the prevalence rate of gambling addiction to go up. Because we don't know that. But at what point are we normalizing it so much that it's hard to get away from?

CHAKRABARTI: So that's Cole Wogoman, director of Government Relations at the National Council on Problem Gambling. And by the way, if you or someone you know is struggling with a gambling addiction, the national problem gambling hotline number is 1-800-GAMBLING. ... Ben Schiffrin. I'm just wondering what your thoughts are on that, on the broader cultural or even moral implications.

SCHIFFRIN: I just think that's why platforms like Kalshi want to say that they are commodities exchange. Because otherwise they have to be subject to the regulatory regime for sports betting platforms.

And those regimes have things like age restrictions. On Kalshi you can bet if you're 18, whereas most state laws are 21. Polymarket even allows betting by minors. State regulatory regimes have limits on how much people can bet, they have addiction programs. So it's unsurprising that Kalshi doesn't want to be subject to those limits.

And then I would also say that to go back to the point where they say they're a commodities exchange, they advertise themselves as the first nationwide legal sports betting platform. And so for them to say that they should be regulated as a commodities exchange, while they advertise themselves as a sports betting platform and get around all of the things that Cole was talking about is hugely problematic.

CHAKRABARTI: Polymarket does have a statement, for example, on each one of its questions or bets about anything related to the Middle East. And the statement is this.

The promise of prediction markets is to harness the wisdom of the crowd to create accurate, unbiased forecasts for the most important events to society.

That ability is particularly invaluable in gut wrenching times like today. After discussing with those directly affected by the attacks.

They did not specify which attacks they're talking about in the statement.

Who had dozens of questions, we realized that prediction markets could give them answers they needed in ways that TV news and Twitter could not.

End quote.

CHAKRABARTI: So once again actually, Professor Hanson, this gets back to what you were saying about providing a source of information that could inform, or even in this case, soothe people. Polymarket makes the same assertion there. But I wanna just end with this question.

Like right now I'm looking at a Polymarket question you can bet on, there's been $730,000 of volume on this question, and it is, will Hamas release all Israeli hostages by October 31st? It's on Polymarket and Professor Hanson, I just, with complete honesty, I find betting on that question, betting on the fact of people's lives morally repugnant.

Isn't there a line that we should draw on what people can or should be able to bet on as a society?

HANSON: I don't think Hamas is going to release the prisoners or not in order to win those bets. If you're worried that's somehow gonna influence their policy, I think that's pretty unlikely.

CHAKRABARTI: No, I'm worried about the dehumanizing effect, that being able to bet on the questions like this have on us all.

HANSON: I think it's quite human to bet. It's quite human to want to take chances and take risks and see what you're made of. It's quite human to share information with other people. The more valuable market here would be policies related to doing something regarding Hamas.

If we offered the following deal, would they accept it? How long would peace last before violence broke out again? We could have markets that would tell us which policies to adopt, that's human, to reduce the harm from things that could go wrong because we make bad decisions.

The first draft of this transcript was created by Descript, an AI transcription tool. An On Point producer then thoroughly reviewed, corrected, and reformatted the transcript before publication. The use of this AI tool creates the capacity to provide these transcripts.