Would it be fair if you could bet on date of your college reunion?

Howell Jackson.

Stephanie Mitchell/Harvard Staff Photographer

Work & Economy
Would it be fair if you could bet on date of your college reunion?

Financial regulation expert says greater oversight needed of wager-on-anything prediction markets given risk of insider trading, worsening of gambling problems

Liz Mineo

Harvard Staff Writer

May 19, 2026 8 min read

The mushrooming growth of prediction markets, where people place bets on anything from the winner of the 2028 U.S. elections to Taylor Swift’s wedding date, has recently drawn scrutiny over allegations of insider trading and market manipulation.

In April, a U.S. Army soldier was charged with using classified information to bet on the timing of a U.S. military operation to capture Venezuelan President Nicolás Maduro. According to the Justice Department, the soldier, who took part in the operation, made more than $400,000 in wagers he placed on Polymarket.

And a recent investigation by The New York Times found a number of well-timed bets on Polymarket involving the war in Iran, cryptocurrency, and other events that hint at insider trading.

In this interview, edited for length and clarity, Howell Jackson, James S. Reid, Jr., Professor of Law at Harvard Law School, discusses the appeal of prediction markets and the need for clear regulations.

How do prediction markets differ from gambling and sports betting?

The prediction markets that have been in the press lately, such as Kalshi or Polymarket, involve what’s known as event contracts. They work like this: You purchase the right to get a payment if the event occurs — like the Patriots win the Super Bowl. If they win, you get $1. If you lose, you don’t get anything.

Functionally, prediction markets can be very similar to traditional gambling, except that with the gambling, you’re typically betting against the house, and the house sets the price. An event contract is market-based, and supply and demand set the price. Still, event contracts look an awful lot like gambling.

Event contracts have been around for a while in financial settings — such as the closing of corporate mergers or the occurrence of a weather event, but the contracts have morphed into other spaces, such as sporting events and political events.

Really, they can be about anything. How many times I’ll say the word potato in my class next week could be an event contract.

“The proliferation of these contracts and their popularity among certain groups, particularly younger generations, is surprising.”

As an expert in financial regulation, what concerns you about the appeal of prediction markets?

It is surprising to me how popular these new kinds of event contracts have become, and how many different domains they can cover, from the cultural to the political to the geopolitical. The proliferation of these contracts and their popularity among certain groups, particularly younger generations, is surprising. All of my students know about event contracts!

There are reasons to be worried about this explosion of event contracts, just as there are reasons to be worried about any kind of excessive gambling. Gambling can be fun, but it can also become an addiction, and its social costs can be staggering.

Historically, in the United States, we’ve either prohibited or tightly regulated gambling. No doubt, gambling has become more popular over recent decades, and the states have been actively engaged in promoting gambling and lotteries to gain revenues and promote economic development.

But the normalization of gambling has occurred under a constrained environment with some safeguards, some consumer protection, some age limitations, and some programs to address the addiction problem. For me, at least, it’s a space where we should proceed cautiously.

Can you talk about the legal landscape in which this prediction markets operate?

It’s fair to say that the legal landscape is murky.

One thing that’s clear is that some event contracts fall within the Commodity Futures Trading Commission (CFTC)’s jurisdiction. Financially-oriented events, like the ones I mentioned earlier, have been around for a while, and are now uncontroversial. The expansion of event contracts into political gambling was a big issue in 2024. Prediction markets became an even bigger issue — with lots of legal complexity — when Kalshi and other markets moved into sporting events in 2025.

In 2010, Congress established the relevant statutory structures when it expanded the scope of CFTC authority over event contracts. Kalshi and its lawyers take the view that this legislation gives the commission exclusive jurisdiction over all event contracts.

But Congress in 2010 also included a special rule that said that the CFTC may exclude contracts based on gaming, assassinations, or other activities contrary to the public interest, and the commission in fact adopted a regulation exercising that authority.

Prediction markets critics and state gambling officials argue, among other things, that this special rule prevents many non-financial event contracts from coming under CFTC jurisdiction.

The situation with Polymarket is a little more complicated because its main prediction market is located outside of the United States, beyond CFTC jurisdiction as long as it does not offer contracts to U.S. residents.

Polymarket is looking for the CFTC’s approval to lift the 2022 ban on U.S. users from its offshore exchange, but in the internet world, there are ways of getting around the geographical locations by using VPNs and other things that my students understand much better than I do.

Polymarket is also, as I understand it, now trying to find ways to expand its regulated presence in the United States so it can complete more effectively for U.S. customers.

Polymarket and other prediction markets say that they are “more accurate than polls” and that they “predict the truth by harnessing the wisdom of the crowd.” What’s your take on that?

Well, there’s some truth to this claim, but it’s incomplete.

If you compare the spreads between the house betting lines for sports and other things, it’s quite possible that a market mechanism predicts more precisely what events are going to be. There may well be wisdom in crowds, and prediction markets may well be more efficient markets than gaming houses.

The interesting thing about the data coming out about prediction markets is that while prediction markets be more efficient overall, a small group of people seems to be winning most of the money.

If you think of all these intoxicated young men betting on the Super Bowl, you probably wouldn’t be surprised to learn that there’s smart money on the other side that’s doing much better. So maybe prediction markets have more efficient prices, but also a less-even playing field for most folks placing bets.

Conceivably, Las Vegas was fairer on balance, and certainly it was much harder to get there.

Are concerns about market manipulation and insider trading surrounding prediction markets exaggerated?

There are deeply troubling anecdotal accounts of spiking bets before recent military incursions in Iran or the intervention in Venezuela earlier this year. There clearly seems to be a problem that looks an awful lot like insider trading and market manipulation.

Formally speaking, these practices are prohibited under the CFTC regulations and Kalshi’s terms of service. But policing prediction markets for abuse is a much harder problem than insider trading on the New York Stock Exchange because there we have an identified number of companies, and we know who holds their shares, and we have an apparatus that can detect corporate abuse.

Whereas if you look at all the thousands of different predictions out there combined with the lack of a good oversight structure in place, how could you possibly keep track of all the people that might have insider information, including people who make up the prediction market?

I could (but won’t) put up a prediction about how many slides am I going to use in my class next week, and I’m going to have pretty good information about what that number is going to be. With the explosion of prediction markets, the problem is much harder to detect, even if it’s formally prohibited.

How should policymakers regulate prediction markets?

What Congress really needs to do is intervene and figure out that if we’re going to have a national prediction market, who’s going to be policing the downside of it, meaning the social costs of gambling.

And it may not be the CFTC. It feels more like a Consumer Financial Protection Bureau kind of thing. Of course, the bureau is on the ropes right now and is seriously underfunded, but you could imagine getting a federal oversight authority that’s more in the consumer protection vein.

Some of my students have been working on solutions involving the creation of new oversight bodies that would include state and well as federal engagement. There are many ways to address the problem, though I don’t see any of them actively on the agenda in Washington right now.

Some people say prediction markets are picking up their interest not just from gambling, but from people who, two or three years ago, were buying Bitcoin and are drawn to this sort of entertainment/investment/gambling market niche.

For old-timers like me, who think you should buy an S&P 500 index fund and not pay any attention to it until you retire, this is a different mindset. Gen Z, however, is very attracted to these markets.

Unfortunately, on many platforms, prediction markets are increasing sitting next to stable retirement plans and emergency savings accounts. The social costs of bad choices here are definitely something to worry about.