Markets Accelerate, Regulations Lag
Election-betting markets have existed in academic environments for decades, but the launch of Polymarket in 2020 and Kalshi in 2021 has opened these markets to the general public, with major impacts to the regulatory and information environment. As the Biden administration came into office, it took a purposeful federal regulatory and legal position. In January 2022, under Biden, a Commodity Futures Trading Commission (CFTC) investigation into Polymarket concluded that it was an “illegal unregistered or non-designated facility for event-based binary options online trading contracts.” The company was fined $1.4 million and barred from operating in the United States.
That settlement left significant gaps, however. While it prohibited people within the United States from betting on U.S. elections, it did not prevent those outside the country from making such bets. An anonymous French bettor won more than $80 million by correctly betting that Donald Trump would win the 2024 presidential election. The high-profile win brought attention to election markets as a tool for informally gauging — and potentially shaping — public opinion ahead of an election.
The change of presidential administration brought a change in regulatory approach as well. In July 2025, the Trump administration ended inquiries by the Justice Department and the CFTC into allegations that Polymarket continued to allow illegal American gambling on the site. That same month, Polymarket acquired QCEX, a U.S.-regulated and licensed derivatives exchange that allowed it to participate in the U.S. markets. Similarly, while Biden’s CFTC in 2023 denied Kalshi’s request to list contracts for Americans to bet on congressional races, in May 2025, Trump’s CFTC declined to appeal after a court ultimately ruled in Kalshi’s favor on the issue.
These swings in regulatory approaches have left a permissive and opaque operating environment for prediction markets. While internal policing and platform-enforced consequences for misconduct are welcome and necessary safeguards, companies cannot regulate themselves. Some lawmakers at the state and federal levels are taking steps to curb abuses. Kalshi is facing a barrage of federal lawsuits, with Arizona, Nevada, and Washington among the latest states to sue. At the federal level, the bicameral Bets Off Act proposes applying the current legal restrictions on casino gambling to prediction markets. This would make bets on war and assassination, which are already illegal in traditional gambling settings, off-limits for prediction market bettors too.
But additional regulations and academic research are needed to fully realize and address the dangers that unregulated prop betting poses to elections. Some bettors may not be acting in good faith, for example. They may have a personal stake in the outcome, access to inside information, or ties to foreign actors, and they could use their wagers to attempt to sway election results. Additionally, although the accuracy of prop betting predictions is unclear, reports suggest that foreign actors view prediction markets as a source of information they can use to influence or interfere in U.S. elections. Protecting the integrity of elections from these risks is critical.
Concerns Over Election Perceptions
At times, the betting markets’ own social media accounts have served as direct sources for election misinformation. During the most recent New York City mayoral election, a Polymarket social media post incorrectly implied that Zohran Mamdani was on a path to win the election with the help of “rigged ballots” where his name was listed twice. The Polymarket post did not state the fact that on New York City ballots, candidates’ names are commonly listed more than once because they can represent more than one party. Further, the market predictions may also just be wrong.
The markets’ potential to influence public perceptions of election results has also raised concerns about the prospect of election betting by campaign insiders who are invested in the outcome of their races. At least three congressional candidates have been banned by betting platforms for betting on their own races. Additionally, campaign staffers have been betting on their own candidates and seeing returns in the thousands of dollars. Revelations about political insider trading may impact trust in elections more broadly and cast doubt on election results. Additionally, paid partnerships with influencers across platforms are undermining the integrity of elections by pushing conspiracy theories and linking them to open bets in the events markets. Kalshi and Polymarket said they have asked their paid influencers to remove such posts when observed.
The potential for misinformation and distrust in elections will only grow as the line blurs between the news and the prediction markets seeking to “gamify the truth.” Polymarket is using trending rumors and “Breaking News” social media posts to advertise trending bets and invite bettors to engage. Simultaneously, the companies are signing contracts with news outlets for prominent placements in news segments to show the status of bets on key policy and political issues, mimicking the placement and segment allocation reserved for actual opinion polls, even though prop betting lacks the ethical guardrails and methodological rigor employed by pollsters.
This trend is especially significant as news, social media, and technology companies are consolidating, potentially centering decision-making, funding, and market footprint in the hands of a few industry power players. Additionally, as prediction markets become increasingly popular, political figures are looking to capitalize — for example, a member of the Trump family holds an advisory position in Kalshi and an ownership stake in Polymarket, and Truth Social has announced plans to create a prediction market affiliate called Truth Predict. This could mean that more betting platforms emerge in the future and that proposition betting with little regulation or guardrails becomes normalized within political and media discourse.
What to Do Ahead of November
As the midterm elections draw nearer, proposition bets on elections and key policy issues will likely surge. Anyone who watches and engages with the election markets should do so mindfully. Consider motivating factors for placing bets: Outside influence, inside information, and a stake in the outcome can be secretly impacting wagers. Rely on verified news sources to understand real events. Remember that prop bets are investments in opinions rather than validations of facts. And remember that elections are not decided until every vote is counted — bets on the result of a close or contested election are not reflective of the actual outcome.
Rachel Moran is a senior research scientist at the University of Washington’s Center for an Informed Public.
