Prediction Market Founders Got Mainstream Adoption. Now They're Worried About What Came With It.

The industry's own intellectual founders have been raising a longer-running concern: that the commercial success of platforms like Kalshi and Polymarket is actively undermining the case those platforms were built on.

On June 11, Kalshi released an ad featuring actor Timothée Chalamet, a moment Wired described as the prediction market equivalent of the 2022 crypto Super Bowl ad blitz. Splashy. Zeitgeist-capturing. A sign that real money is now backing mainstream consumer adoption.

The philosophers who built the intellectual scaffolding for these markets mostly didn't notice.

Two Very Different Definitions of "Prediction Market"

At Manifest, a recent forecasting conference held at Lighthaven in Berkeley, California, attendees—a mix of academics, startup founders, and active market participants—had largely not seen the Chalamet spot, according to Wired's reporting from the event. They were busy debating something more fundamental: whether the platforms have drifted so far toward sports wagering that the original promise of prediction markets as public-good information tools is being lost.

Dan Schwarz, cofounder and CEO of FutureSearch, an AI research and forecasting startup, told Wired plainly: "We were all waiting for so long to be in the world we're in now." But that world has come with problems. Schwarz specifically named insider trading and sports contracts he believes are feeding gambling addiction. His conclusion: "Prediction markets would have to deliver a lot more value than they are now" to outweigh those harms.

Schwarz is not a political opponent of deregulation. He's a founder inside the industry.

What the Original Argument Actually Was

The case for legalizing prediction markets was never primarily about sports. Academic advocates argued for years that markets on political and economic outcomes aggregate information better than polls or pundit panels. The theory: people with real money on the line have an incentive to be accurate, which produces better forecasts.

Yet researchers writing in Science in April found that prediction markets feature a "gambling-like design" that raises "public health concerns." The study also suggested that rather than providing better information, prediction markets could be used for "democratic manipulation."

The Problem With Winning

The strongest concern from the Manifest attendees, fairly stated: scaling prediction markets to a mass consumer audience requires giving people something they actually want to bet on, which means sports. Sports volume funds the platforms. The platforms fund lobbying and legal fights. So the sports betting subsidizes the serious forecasting.

That's a coherent argument. If it holds, the gambling volume is a necessary cost, not a bug.

But Schwarz and others at the conference are skeptical the tradeoff is working out that way. The concern is that sports dominance isn't a temporary on-ramp, it's becoming the product. When a platform's brand ambassador is a movie star pitching fans on Knicks bets, the "information aggregation for societal benefit" framing starts to look like a rearview mirror.

Kalshi has pushed back on the characterization. "Kalshi is different from sports betting from the way our exchange operates on a structural level," company spokesperson Jacki McGavick wrote in an email. "Sports betting operates like a casino, where everyone is playing against the 'house.' Kalshi works like the stock market, with customers trading against other customers. Unlike a casino, Kalshi doesn't win when our customers lose."

Both Kalshi and Polymarket, which had sponsored Manifest in previous years, did not sponsor this year's event and declined to comment on the absence, according to Wired.

A Debate Without Easy Resolution

A recent wave of insider trading and a handful of state-level lawsuits seeking to get markets banned have added to the pressure. These trends have started to sour public opinion, and Kalshi and Polymarket could be easy targets should the political winds shift.

Some attendees, like David Bensoussan—who told Wired he has made $1.6 million in profits on the platform—suggested the companies could go on the lobbying offensive with Democrats, much like the crypto industry has found enough open minds on Capitol Hill to keep regulations mostly at bay. There are signs this is already happening, with a trade group advised by a former Democratic lawmaker.

The unresolved question isn't whether prediction markets are legal. They are. The question is whether the regulatory permission structure, built on arguments about forecasting accuracy and information markets, remains the right framework once the dominant use case is betting on sports. That's the argument Schwarz and his peers are making, and neither Kalshi nor Polymarket has responded to it publicly.