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By the time the US attacked Iran, on February 28, half a billion dollars had been wagered on Polymarket, one of the world’s top prediction markets, predicting when the strikes would happen. As when the US invaded Venezuela, reports began to spread of new accounts making six-digit profits, which attracted speculation about people with prior knowledge of the attack betting on it. Ethical concerns grew when a user made five hundred thousand dollars by correctly predicting the date of Ayatollah Ali Khamenei’s death.

Not long after the war started, Polymarket added a note to its Middle East markets. “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,” the company wrote. “After discussing with those directly affected by the attacks, who had dozens of questions, we realized that prediction markets could give them the answers they needed in ways TV news and X could not.”

The chiefs of Polymarket and Kalshi—the market leader in the US—often talk about their products as information machines that are here to replace, or at least complement, news media. News organizations such as CNN and Dow Jones have already signed deals to work with those prediction markets in an effort to offer their audiences real-time forecasting data. But Dustin Gouker, an expert on gambling and prediction markets who covers the industry in his newsletter, Event Horizon, told me that the press shouldn’t worry about people turning to Kalshi or Polymarket for news. On Kalshi, 85 to 90 percent of the trading volume comes from sports, Gouker said, followed by crypto, though he predicts that betting on news events will grow. Instead of viewing the markets as competitors, he sees their rise as an opportunity for the media to embrace the public’s growing hunger for information. “Prediction markets and news media exist in parallel,” Gouker told me. “You’re seeing deals between them because they need each other.” Our conversation has been edited for length and clarity. 

ILN: The US attack on Iran put prediction markets in the spotlight for insider gambling on news events. Do you think the backlash they are facing will reach a tipping point?

DG: This is just the course of business for Polymarket. They offer markets on things like air strikes and wars. They believe there’s value in those markets, and they have taken a lot of blowback for offering them. Kalshi only had a market about when Ali Khamenei would be out of office, but the rules said that his death would not count as “leaving office,” so they closed betting at the last traded price, which gave them bad PR, too.

There’s not much that can be done from a regulatory standpoint. Kalshi is regulated by the Commodity Futures Trading Commission, the federal agency overseeing derivatives markets, while Polymarket International exists outside the US regulatory framework. Prediction markets are a big topic in Congress, and insider trading has gotten a lot of attention on Capitol Hill. On Thursday, senators introduced a bill banning high-level government officials from trading on prediction markets. They see it as a national security issue, and it’s hard to argue with that: if people are leaking information by betting on it, it’s signalling ahead of time that certain things are about to happen.

In theory, insider information should give us better information—but it’s a great ethical question whether markets on things like air strikes should exist.

If insider trading helps make predictions more accurate, are prediction markets even interested in taking action against it?

Prediction markets have identified this as a PR problem: if people think that the markets are cooked by people with inside information, they won’t trade on them. We’re learning in real time what is okay and what is not. Kalshi can pose a question, come up with rules, and spin up a market that hasn’t existed before, and there are hundreds of thousands of people who might have “insider” information about it. A lot of times, what makes it insider information is just being able to bet on it—without that opportunity, the information would have no market value.

It’s a hard problem to solve, considering the pure breadth of the markets, though not impossible. Kalshi, for instance, knows who you are: you have to give them your Social Security number, and they can link weird trades to you personally. Polymarket also has ways to go back and reverse engineer who you might be, if they care enough to do that.

For years, we’ve seen news outlets trying to gamify news to attract and engage audiences. In some ways, prediction markets are doing exactly that: by putting money on outcomes of real-life events, people can become stakeholders in current affairs. Is this news being gamified—or simple gambling, only that the subject is the news?

Prediction markets are giving us probabilities of real-time events. That’s hard to do in the real world—and I definitely think it’s another way to get people to engage with the news. If people are trading on a prediction market, they’ll come to news media for more information about it. When you’re faced with declining readership and revenue from journalism, that’s good for the industry, right?

Looking at things like CNN’s partnership with Kalshi to integrate their predictions into news coverage, or Dow Jones’s deal with Polymarket—are they trying to stay ahead of the curve?

I interpret it mostly as free earned media for Kalshi and Polymarket. If you’re trying to get into the mainstream, what better way than to be in front of audiences who are already interested in the news, whether it’s about election polling or the snowfall?

What do news outlets get out of this relationship?

Prediction markets are increasingly becoming the commodity—a disseminator of information. They’re pricing real-life events, which is something that the news media is not good at. I know this sounds like a cliché, but they’re putting a number on things that otherwise would be very difficult to value.

When it comes to a question like Will the government shut down or not?, people put their money on it based on what they’re hearing, and the prediction market aggregates all that information.

What’s the business aspect of this? Who’s paying who when prediction markets and news organizations come together?

It’s not clear, and it’d be great if someone reported that out. CNBC recently had a disclaimer saying that they have some equity in Kalshi, but there may not always be a commercial aspect: Kalshi and Polymarket love being cited by CNN or the Wall Street Journal, and media entities in turn can get the markets’ information quickly.

Can prediction markets eventually replace polls and forecasts?

I don’t think so. One of the main inputs into prediction markets are polls. If polls go away, I’d argue that prediction markets become far less efficient. But the advantage of prediction markets is that they can take other information into account, react faster, and price events in real time—unlike a poll, which is just a snapshot.

When it comes to forecasting, I think they provide fascinating data that is additive to the world. If we look at the midterms, we don’t even know who’s going to win the primaries yet, so polling is extremely hard to do. If we want to know who will control the House, the best place to go right now are prediction markets.

What’s the difference between prediction markets and gambling?

From a user standpoint, there’s no difference. Forget about the legal arguments. The underlying activity is gambling: you’re putting money on uncertain events for a possible return. When you bet on sports at DraftKings or FanDuel, you’re betting against the house. On prediction markets, you’re betting against another person, and Kalshi or Polymarket takes a fee off your transaction.

So are prediction markets a positive or negative development for news media? How can journalists best use them?

I might be in the minority, but I don’t think it’s a bad thing. It helps us understand the world in a way we otherwise couldn’t. News media struggles with forecasting future events, and I’d say that prediction markets are just simply better at that.

But there are caveats. Prediction markets shouldn’t be used as a source of truth, or as the only input into the news. Last week, markets predicted that Ken Paxton would be the runaway winner of the Texas Senate primary, yet John Cornyn came out on top. Kalshi forecast that we’d add sixty thousand jobs in February, and we ended up losing ninety thousand. And both were pretty liquid markets.

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