Stories
Prediction Markets Spark Regulatory Alarm with US Stock Bets
- •Prediction markets like Polymarket and Kalshi are expanding into US stocks, allowing traders to wager on companies such as Tesla and Apple, raising concerns about investor protection and market oversight.
- •These platforms, which previously focused on events like elections, now offer tens of thousands of markets on stock moves and corporate events, operating outside many traditional investor protections.
- •Legal experts warn that the rapid growth of equity-linked prediction markets could influence underlying stock trading and undermine regulators' ability to police the market.
- •Polymarket International has seen over $220 million wagered on approximately 31,000 equity-linked markets, with Nvidia, Alphabet, Apple, and Tesla being the most popular stocks.
- •Regulators, including the CFTC and SEC, are reviewing the oversight of these markets, with calls for the SEC to take the lead due to concerns about potential insider trading and the sidestepping of securities laws.
Key Questions Answered
Nvidia, Google parent Alphabet, Apple, and Tesla have been the most popular individual stocks on prediction markets. Kalshi also offers thousands of corporate Key Performance Indicator markets on events such as iPhone launches and Tesla deliveries.
The Securities and Exchange Commission and the Commodity Futures Trading Commission are reviewing regulation of equity-linked prediction markets. The agencies jointly sought public feedback in June regarding whether one of them should serve as the primary watchdog for these novel event contracts.
Legal experts and lawmakers warn that equity-linked prediction markets operate outside many regulated investor protections and surveillance rules. They express concern that fast growth could eventually influence underlying share prices, undermine regulatory oversight, and facilitate insider trading similar to traditional securities markets.
