Prediction markets have been harshly criticized over claims of insider trading and illegal gambling practices, leading to politicians and media demonizing them wholesale. Are their warnings symptoms of a growing problem in dire need of recourse, or is it all part of a smear campaign meant to wrest political power away from the people? Today, we dispel the myths of these “dangerous” prediction markets, highlight the differences between the top trading apps, and gain some powerful insights from our very own Stu Burguiere.

What is a prediction market?

A prediction market is a system that allows users to trade shares on the outcomes of specific events. In the words of the Commodity Futures Trading Commission, “Prediction markets offer a variety of products designed to help the public forecast, plan for, hedge, and even harness perceptions of future events.”

'When I take a position, I assume I'm going to hold it until resolution.'

Although today’s prediction markets revolve heavily around politics and sports, the first markets centered on something a little less glamorous — agriculture. The Grain Futures Administration of 1922 was a regulatory commission tasked with combating fraud among grain traders. Their efforts were so effective that, by the 1930s, the commission expanded into other products and industries. Under a new name, the Commodity Exchange Administration oversaw markets that regulated cotton, eggs, rice, butter, metals, energy, and more. Finally, in 1974, Congress passed the Commodity Futures Trading Commission Act, which created the Commodity Futures Trading Commission that oversees prediction markets to this day.

The important thing to keep in mind is that prediction markets are nothing new — they’ve been around for a century! However, an increase in online accessibility and notoriety has landed these legal trading platforms in hot water.

Why prediction markets are “dangerous”

If you spend any time online, you’ll see how prediction markets are vilified by everyone from politicians to the media. Most of them claim the same thing — prediction markets are a form of online gambling, a practice that isn’t legal on a federal level. In fact, some states, like Arizona, are suing popular prediction market apps, accusing them of illegal betting practices.

The New York Times even called prediction markets “dangerous,” noting that “prediction machines have become infrastructure for the legitimacy of event outcomes, no matter how outlandish.” In other words, prediction markets have the power to reveal truths and trends outside the media’s control, making them a direct threat to the left-wing media machine.

According to the chairman of the CFTC, Michael S. Selig, prediction markets exist as a way to combat the fake news, stories, and narratives of the media. Instead of relying on talking heads to tell their audience how they should feel about a particular event, users log on to their favorite prediction market app and vote on an event’s outcome based on their own knowledge and deductive reasoning. Since users are discouraged from voting in favor of outcomes they believe to be a lie, prediction markets reveal societal truths backed by real money, giving facts more weight than misinformation with an honesty incentive at the end.

Both left-wing media and politicians, like Arizona’s Democrat Attorney General Kris Mayes, hate prediction markets because they take narrative power away from the elite and put it back into the hands of the people. As for the warnings of illegal gambling? That’s a lie. The CFTC classifies prediction markets as financial products similar to stocks traded on the stock exchange, which are completely legal and regulated by the federal government.

RELATED: Prediction markets let you 'bet' in states where gambling is banned: Here's how

Ethan Miller/Getty Images

Top prediction market apps

Thanks to prediction market apps, the markets themselves are easier to access than ever. Two apps in particular dominate the App Store and Google Play: Polymarket and Kalshi.

Polymarket is a sports-first trading app with robust stats on the MLB, NBA, NHL, golf, and more. It also offers a section for politics and weather, with more categories on the way, but if you’re a sports fanatic, Polymarket is a great place to start.

Kalshi offers a much broader range of trading options. From sports to politics to crypto, culture, and more, Kalshi’s rounded trading portfolio makes trading much more accessible for new and seasoned users who prefer more variety.

Since both apps are financial products, you will need to provide some personal information to create your account — this can include your first and last name, date of birth, phone number, home address, your Social Security number, a form of government ID (either a driver’s license or a passport), and a current selfie for verification.

Remember that prediction markets are subject to the same ethics and government regulations as the stock market. That means all trades are subject to government scrutiny, and insider trading laws do apply.

Make markets ‘Predictable with Stu Burguiere’

To get a better understanding of prediction markets and how they work, we chatted with BlazeTV resident expert Stu Burguiere. Here’s what he had to say:

Q: What are the big differences between the prediction market platforms? Are there any benefits to choosing one platform over another (taking into account the UI, trade options, trading fees, etc.)?

A: I think it’s beneficial for the ecosystem to have many different approaches. Kalshi is the best known in the U.S., they started here as a fully regulated platform in 2021. I was using the platform within their first few weeks of existence, but they didn’t get election markets until 2024 after suing the government and winning.

Polymarket took a more crypto-forward approach and mostly remained overseas in a bit of a gray area for U.S. users. They have since launched Polymarket U.S. but have only recently expanded beyond sports.

PredictIt has been around much longer but was limited in the amount you could invest in any contract until recently. Their fees have been a famous sticking point among the nerd community, of which I am a member.

There are also several other smaller players and rumors of up to a couple of dozen new prediction markets on the way. Some of these will likely partner with deep-pocketed companies and attempt to challenge the big boys.

Q: What are the pros or cons of using multiple prediction market apps?

A: If you’re a serious trader or someone investing a lot of money in this area, it is probably worth being on multiple apps and sites. Even markets with high liquidity will sometimes have differences in price by a few percentage points, and there’s little downside in chasing the best price. You also will find instances where a nearly identical-looking contract has preferable rules on one site over another.

It can get confusing to keep track of everything, but if you’re looking at this as part of a real money portfolio, it’s worth it to look for these advantages.

But for someone just getting started, I wouldn’t sweat it.

Q: Which app provides the best trading data to make a sound decision, set expectations, etc.?

A: I think you can find the information you need to trade pretty easily on most, if not all, of the various markets once you get comfortable. I wouldn’t say any of them are the places where you’re doing research, though. The most important part is to always read the rules because the headline question is occasionally more complicated than you think.

Q: Are there any delays in depositing money to trade or receiving money after a trade is complete?

A: I find it to be about as easy as funding any investment account. Kalshi, for example, offers no-fee bank transfers in one to three days, almost instant crypto transfers, and even Venmo, CashApp, Google Pay, PayPal (fees vary), and traditional bank wire transfer. Maybe even carrier pigeon.

You won’t be surprised to hear they make it very easy for you to deposit your money! But I have also never had an issue at all withdrawing funds from any of them.

If you’ve never dabbled in crypto, the overseas Polymarket exchange can be a little intimidating. The U.S. version seems to be more manageable for the average person.

Q: Are there any missing features between the mobile and desktop web versions of Kalshi and Polymarket?

A: I prefer desktop for anything complicated. It’s pretty easy to make basic trades on the apps or to see how your investments are performing. When you are looking back at your history, you’re going to want the desktop, unless you have a fetish for scrolling and clicking “more” over and over again.

Q: Is there any risk of “wash trading” or manipulation where users can sway the stock in favor of a certain outcome?

A: I don’t think manipulation presents much risk overall, especially with the current market liquidity. There are people much smarter than me trading thousands of times a week, and that’s part of the deal. But that’s not how I go about it. When I take a position, I assume I’m going to hold it until resolution. If you take that approach, it doesn’t really matter where the markets move on a day-to-day basis. In the end, you’re either going to be right or wrong, and no market actor can change that.

Q: How serious are the “illegal gambling” lawsuits, and what are platform holders like Kalshi and Polymarket doing to push back against this narrative?

A: As with any innovation, there are plenty of annoying government officials trying to screw it up. Throw in a hefty dose of established actors looking to protect their turf against competition, and the threat is serious in scope if not in argument.

Luckily, for the time being, we have Michael Selig as CFTC chair, and an administration friendly to financial innovation. Selig has correctly been aggressive in defending the authority of the CFTC to maintain oversight over these markets. Just like your state can’t ban you from buying Walmart stock, they shouldn’t be able to stop you from participating in prediction markets.

This could all change under a different Congress or a President AOC, but we can deal with that level of hell when we arrive in it.

Q: How do prediction markets handle ties? Do these come up often or rarely?

A: I would say a tie is very rare. Most of the rules are written to make them impossible. In the old days, there were sometimes markets with poorly written rules or descriptions that led to controversy. This isn’t particularly common anymore, but it does occasionally happen.

There was a recent example revolving around the removal of the leader of Iran. Kalshi is legally prohibited from listing or paying a contract that is the result of death or assassination. This was clear in the rules, but a lot of people don’t read them. So there was controversy over the required unwinding of that contract, and some overseas markets without those restrictions resolved the contract in a totally different way.

Those rare examples get lots of press but occur in a tiny percentage of the markets available. Most people will never even experience one of them.

Q: Do you have any tips, tricks, or advice for new users who are just starting to get into prediction markets?

A: Start small and assume you’re wrong more often than you think you are. Challenge yourself on your priors, and especially in politics, make sure you’re not investing with your heart. I always feel better investing in a race when I’m on the side of the candidate I want to lose. At the very least, if I’m wrong, I’m happy with the outcome in real life. And if the candidate I dislike winds up winning, at least I’m being paid for my pain. It’s hedging your life.

Oh yeah, and hang out with us at PredictableShow.com.

Tune in

Still curious about prediction markets? Maybe you want to throw some of your own cash on a current event, but you’re not sure how to get started? Check out Stu’s new show — “Predictable with Stu Burguiere” on YouTube and Substack — for the latest prediction market news, updates, insights, and more.