Prediction markets surged in 2025, drawing Wall Street cash and regulatory heat (Photo by Michael M. Santiago/Getty Images)
Prediction markets – once a niche for political junkies and crypto enthusiasts – have exploded into a multibillion-dollar industry, transforming how Americans (and some Canadians) wager on real-world events. In these online exchanges, users buy and sell “yes” or “no” contracts on everything from elections to sports, with prices moving like stocks to reflect the crowd’s odds. The draw is simple: anyone can make a prediction and, if they’re right, make money–blurring the line between betting and finance. But the 2025 boom has sparked a debate: Are these platforms real forecasting tools or just unregulated gambling? In the U.S. and Canada, officials, industry leaders, and investors are wrestling with what this means for the future of betting and markets.
A Legal Gray Zone Fueling Rapid Growth
Prediction markets have flourished in a legal gray area, especially in the U.S. Unlike sportsbooks, many platforms say they’re regulated as financial exchanges. The Commodity Futures Trading Commission has granted a few “Designated Contract Market” approvals, allowing event contracts to be treated like derivatives and operate nationally without state licenses. Startups such as Kalshi and Polymarket argue their contracts are commodities or swaps, not wagers – sidestepping state gambling bans for now.
That posture has unlocked demand. In states where online sports betting is illegal, residents still trade on game outcomes via these apps. “I do consider Kalshi betting,” said Ian White, a special education teacher in Minnesota, “but I love how they get around it by selling futures.” The workaround has allowed platforms to reach users in all 50 states, listing markets on elections, economic data, and sports, regardless of local betting laws.
A parallel workaround to state betting laws is the “sweepstakes” casino model, which sells virtual currency and awards separate “sweeps” credits that can be redeemed for cash via a no-purchase-necessary route. Operators market these as promotional contests rather than gambling, allowing access in most U.S. states.
Canada has been stricter, keeping most of the surge south of the border. Gambling is illegal unless run by a provincial authority, and regulators classify most event contracts as banned retail “binary options.” Independent prediction sites can’t legally operate; they’d be illegal lotteries or unregistered securities. Exceptions are limited to provincially sanctioned novelty bets (for example, Oscar odds) or a rare regulatory exemption. For now, Canadian bettors are largely shut out.
Big Bets: Billionaires, Wall Street, And Main Street Join in
What was once quirky finance now attracts serious money. Kalshi raised more than $300 million in October 2025 at a $5 billion valuation. Trading has soared: CEO Tarek Mansour says the platform hit $50 billion in annualized volume, with more than $1 billion changing hands in a single week this month. A late-2024 court ruling clearing Kalshi to list U.S. presidential election contracts catalyzed the breakout, drawing millions of users; rival Polymarket handled even larger election volumes.
Wall Street and sportsbook operators are moving in. Intercontinental Exchange took a multibillion-dollar stake in Polymarket, signaling institutional buy-in. Interactive Brokers launched a “Forecast” platform in the U.S. and Canada, and Robinhood added event markets through Kalshi in March 2025. By September, analysts estimated Robinhood users were generating about $200 million in annualized event-trading revenue. Flutter and DraftKings are weighing their own moves, while fantasy firms test crypto-enabled sports markets in states where traditional betting is illegal.
Regulators And Casinos Fight Back
State gambling regulators and licensed operators are pushing back. In October, Nevada’s Gaming Control Board warned that “sports event contracts are wagers,” illegal under state law even if listed on a CFTC-regulated exchange. It cautioned licensees against investing in or partnering with such platforms. Arizona, Ohio, and Michigan have issued similar warnings, and dozens of officials have criticized prediction markets as unlicensed sportsbooks. BetMGM CEO Adam Greenblatt called them “in essence, illegal sports betting,” citing the absence of responsible gaming standards and unpaid state taxes. At G2E in Las Vegas, executives vowed to counter a model they say evades KYC, problem gambling rules, and tax obligations. The American Gaming Association is lobbying in Washington, D.C., to narrow loopholes.
Courts, Compliance, And The Road Ahead
Legal fights are a mixed bag. Kalshi won a temporary court order to keep operating in Nevada for now. But a judge denied a similar request from Crypto.com’s Forerunner, questioning whether these contracts are true swaps under federal rules. The CFTC has told platforms to follow state laws and consider geofencing. Congress may step in to decide who regulates event betting. Meanwhile, operators point to voluntary safeguards – 18+ age limits, ID checks, and self-exclusion – and say they’re building responsible, scalable markets.
Ethical questions persist. Fans hail the “wisdom of crowds” and hedging utility; critics warn of manipulation, moral hazards (including controversial political markets), and risks to problem gamblers who may find fewer guardrails than at licensed books. Canadian academics question whether bans help the public or leave Canadians behind as Americans reap forecasting insights.
The Outlook: Boom or Backlash?
As of October 2025, prediction markets are at a crossroads. Money is pouring in, more people are joining, and these contracts are now part of everyday market talk. Some platforms are going global, testing rules country by country. But legal pressure is growing. Courts could make platforms scale back sports and election markets or require state-by-state licenses, cutting their reach and profits. If exchanges win in court, it could lead to a federal rulebook with consumer protections, similar to how the U.K. regulates betting exchanges. Canada will watch Washington closely; U.S. acceptance would pressure Ottawa and the provinces to consider pilots or narrow exemptions, especially as firms find workarounds for Canadian clients.
For now, prediction markets mix big promise with real risk. Some see them as the future of data-driven forecasting; others see illegal gambling. The rest of 2025 will be crucial. Whether they keep growing or hit a regulatory wall, one thing is clear: everyone in North American betting is watching–and some are even betting on the outcome.