In this episode, we discuss prediction markets such as Kalshi and Polymarket, including salient questions such as: Are these just gambling under a different name?; or: Do they serve some important economic purpose (which is, after all, a key rationale for futures markets)?
We talk about the relevant history, stretching back to Pope Gregory XIV in 1591, running through pivotal Congressional decisions in the 1930s, and dealing in some depth with what was – or was not – included in the Dodd-Frank Act of 2010. Gary was in the room for many discussions about that law, which remains highly relevant for markets today. He shares reflections that may interest you - particularly if you care about market integrity or who oversees sports betting. You also can hear what he had to say on these topics in two recent interviews (The Hill Sunday, and BBC Business Today).
The big question is this. When people bet, in prediction markets or elsewhere - on geopolitical outcomes, elections, or sports - how does that affect the “integrity of the underlying” events? Is it possible to protect the integrity of the underlying sports, political or geopolitical events? Might well-regulated prediction markets help promote fair and transparent underlying event markets (or actions)? Or is there evidence of systematic tampering and manipulation?
In terms of additional reading, you could start with Gary’s speech, “U.S. Capital Markets and the Public Good”, April 2, 2024, when he was chair of the Securities and Exchange Commission, which includes this line, “The U.S. capital markets are a national asset. Trust in the markets is a public good. Capital market efficiency, competition, and liquidity are public goods.” The same principles apply to commodity and derivatives markets of all kinds.
For a hard hitting analysis of what prediction markets are and are not, you can consult this report by Better Markets. See also ‘“Prediction Markets,” Gambling, The CFTC & Regulation: Facts, Fiction & The Law’, by Better Markets, March 10, 2026. (Simon co-chairs a group of research advisors at Better Markets).
If you would like more history, try the following items.
“The Prediction Markets Opportunity Part 1: From Experiments to Exchanges”, by Pietro Decio, Neel Baronia, and Damian Stellings, Tower Research, March 10, 2026. There are a lot of interesting facts in their timeline.
“A LaSallian Street Disputation”, John Lothian, John Lothian News, January 2026. John is a legend in the business of commodity markets. John recently interviewed Gary and Simon; this recording should be available soon.
“Historical Political Futures Markets: An International Perspective”, Paul W. Rhode and Koleman Strumpf, NBER Working Paper 14377, October 2008.
If you would like more on Presidential Betting Markets, a particularly fascinating topic, see:
“The Rise and Fall of Presidential Betting Markets: A Century of American Political Wagering”, John Lothian, John Lothian News, October 2025
“Historical Presidential Betting Markets”, Paul W. Rhode and Koleman S. Strumpf, Journal of Economic Perspectives, Spring 2004
This episode was recorded on March 19, 2026. This post was drafted by Simon Johnson.
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