The Human Element of Betting on Prediction Markets
Prediction markets are booming in popularity and facing scrutiny amid reports of market manipulation and insider trading. In the U.S., most betting, be it on prediction markets or on sports apps, is on the outcomes of sporting events. Indeed, betting on sports accounts for between 85% and 90% of the total betting volume on U.S. prediction markets.
Prediction markets are open exchanges online where people wager on future events, from election dates to economic outcomes. Participants can bet on anything from the price of an asset to how many times a public figure will tweet in a day, to the start or end of a war. Each bet shifts the market odds, which in turn reflect what participants collectively believe is most likely to happen.
How the Markets Work
Each Polymarket is a yes/no question, like “Will Putin meet with Zelenskyy by June 30, 2026?”. You buy shares in “yes” or “no” outcomes. Prices reflect crowd-sourced odds and probabilities. For example, if yes is at 30 cents, that’s a 30% chance. Markets resolve based on official results. For multi-outcome events, like “Nobel Peace Prize Winner 2026,” you simply trade on the specific outcome you think will win.
Prediction markets make it easy for people to bet on all kinds of events pertaining to finance, politics, pop culture, and sports. These markets are booming. The Wall Street Journal reported that the total trading volume on the two major prediction market platforms, Polymarket and Kalshi, has soared to $24.2 billion in April 2026, compared to $1.8 billion a year before.
Recently, there have been any number of stories about prediction markets that address the ease of using it, dangers of using it, and whether markets themselves are ethical. One way to make that determination is by applying virtues to the behavior.
Virtue ethics refers to a trait of moral excellence or goodness. It encompasses behaviors and attitudes that reflect high moral standards, such as honesty, integrity, and kindness. Virtues are often seen as essential qualities that contribute to an individual’s character and are valued in various ethical frameworks as foundational principles of a good life. The problem with betting on prediction markets is it challenges virtuous behavior.
How is all of this affecting young people, especially young men, who are the most impacted by the surge in sports betting? Some have become addicted to the activity and are being harmed by turning away from their studies, losing social connectedness, and losing money, in some cases a lot of money. Others participate occasionally, as entertainment or out of a need to feel part of social group. Still others do not know what to think but do have questions.
The Weirdest Bets on Prediction Markets
A story in the Wall Street Journal by Alex Goldenberg describes what could be the most egregious example of betting on prediction markets. Last month, federal prosecutors in New York indicted Master Sgt. Gannon Ken Van Dyke, a special forces soldier at Fort Bragg, N.C., for using his role in the planning of the January raid that captured Nicolás Maduro to win about $410,000 on Polymarket. The Justice Department called it the first criminal case in the U.S. arising from prediction-market wagers. Van Dyke used information about the strike to bet on the event. This misuse of nonpublic information is an example of insider trading.
To show you how crazy these bets can get, last month a Polymarket trader walked away with $21,398 on a $119 bet that the temperature in Paris would exceed a given threshold on a particular day. The bet depended on a single Météo-France weather sensor sitting near the perimeter of Charles de Gaulle Airport on a publicly accessible road. The sensor recorded a spike of 6 degrees Celsius (about 11 degrees Fahrenheit) in 12 minutes before dropping back, and no other station registered the same. A criminal complaint was filed leading to the theory that someone walked up to the sensor with a battery-powered hair dryer.
Here are other bizarre examples that make me shake my head and wonder why we are allowing such betting to be virtually unregulated.
- A user bet $100,000 on Donald Trump acquiring Greenland in 2026.
- Users bet nearly $200,000 in total trading volume on whether Trump would smoke marijuana with Joe Rogan on his podcast, after billionaire and Tesla Motors CEO Elon Musk did so in 2018. Trump appeared on “The Joe Rogan Experience” on October 26, 2025 — without consuming cannabis.
- In October 2025, the Nobel Committee announced that Venezuelan opposition leader Maria Corina Machado had won the Nobel Peace Prize. Hours before that announcement, Polymarket bets on Machado surged dramatically.
Beware of Danger Ahead
Betting on prediction markets can become obsessive behavior, as could any gambling activity. According to an article by Ronald Yaros in Psychology Today, sports betting has not only grown in scale but in intensity. Scholars note that it has shifted from a discontinuous to a continuous form of gambling, characterized by increased availability, higher betting frequency, and more dynamic wagering options such as in-play or micro-bets (Lopez-Gonzalez and Griffiths, 2018). This transformation raises new psychosocial concerns. Research shows that sports betting, especially among younger adults and students, can detract from academic performance, strain social relationships, and contribute to anxiety, depression, and financial instability (Avenyo et al., 2024; Shipurut and Dauda, 2024).
Take the case of John Pederson. The Wall Street Journal reported that Pederson, who was covering from a car crash and low on money, took out a variable-interest loan and started betting on Kalshi, the prediction market that promised a quick way to fix that. At first, it worked. Pederson turned about $2,000 into about $8,000, betting on daily snowfall totals in Detroit. He parlayed that into $41,000 by trading on sports, using strategy he has developed with the help of AI. Then he decided to bet it all and lost.
Some young adults have become addicted to the prediction markets wagering and are being harmed by turning away from their studies, losing social connectedness, and losing money, in some cases a lot of money. Persistent betting could cause depression that affects the lives of these adults for years to come.
It’s important that we don’t dismiss the human element when analyzing whether betting on prediction markets is ethical. A virtue that is relevant here is self-control. Self-control is a fundamental virtue that involves mastering one’s desires and impulses. It is often associated with temperance and is considered essential for personal discipline and moral integrity. Betting in any form can become contagious and have serious consequences for the bettors.
What Can Be Done?
Goldenberg identifies three steps that the Commodity Futures Trading Commission (CFTC) should take to regulate the bets on prediction markets.
- Require prediction markets to monitor on-platform activity and the resolution sources their contracts depend on.
- Federal authorities should develop investigative protocols for manipulation campaigns linked to market positions.
- Congress should clarify how existing fraud and market-manipulation statutes apply to conduct designed to move prediction-market prices.
The Wall Street Journal investigated a variety of activities on the prediction markets to see how they are affecting society. On Polymarket, the Journal found that 67% of profits go to just 0.1% of accounts. This means that less than 2,000 accounts netted a total of nearly half a billion dollars. The Journal analyzed 1.6 million Polymarket accounts that have traded since November 2022, which has at least 2.3 million on the site. On Kalshi, there are 2.9 unprofitable users for each profitable one based on data from April 2026. Total trading volume on both platforms have grown to $24.2 billion, up from $1.8 billion just a year ago.
Should Wagering on Prediction Markets Be Regulated?
Some believe that, from a user perspective, prediction markets are similar to placing a wager on an outcome such as in a sporting event. Prediction Market operators argue, however, that prediction markets and sports wagering are completely different, namely that with prediction markets, the “betting” is peer to peer where users take yes/no contractual positions against other users in the market. Whereas with sports wagering, users place bets directly with a house or operator that sets the terms of the wager and assumes the opposing risk. By taking this position, the prediction market folks are trying to avoid as much regulation as possible.
Prediction market operators have increasingly framed their products as event-based commodities derivatives. That framing is intended to place the product within the jurisdiction of the CFTC rather than state gaming regulators. The CFTC, however, is now taking additional regulatory steps with a different administration as the market for event-based contracts continues to develop.
What’s needed now is for the government to figure out the rules of the road and any guardrails to control betting. There needs to be some sort of oversight. It’s time to create a new regulatory agency that adopts rules, oversees activity, and investigates abuses in all forms of betting, including sports betting and betting on prediction markets. As occurs in many situations, the rules have failed to keep up with the expansion of activity on prediction markets.
Blog posted on May 11, 2026, by Steven Mintz, PhD, professor emeritus from Cal Poly San Luis Obispo. Visit Steve’s website to learn more about his activities.