As the United States becomes more involved in military actions abroad — whether in Venezuela, Iran or, possibly, Cuba — one thing has become abundantly clear. Congress must find a way to tame prediction markets.
That became obvious last month when federal officials arrested a special forces soldier in the U.S. military and charged him with allegedly using classified information to turn $33,034 in wagers on the top-secret Venezuelan operation into $409,000 in winnings, using a company called Polymarket.
Company officials said they alerted the Department of Justice when they learned of the wagers and have cooperated in the investigation, but that hardly matters. The problem is systemic. Bets placed on military operations qualify as “predictive” only if those doing the wagering are privy to insider information. Mere opinions are irrelevant where details of such operations are concerned.
Very few winners
This week, The Washington Post published the results of a massive study of data conducted by finance researcher Pat Akey and colleagues. The data showed that .05% of Polymarket users have won the most money since the company began in 2022.
Put another way, only 1,200 users won a combined $591 million. Those people, the Post said, had a remarkable record in choosing correctly. Akey found “winning so often … was statistically unlikely to be dumb luck.
“They had some sort of edge — expertise, deep research or, perhaps, inside knowledge.”
We agree with Utah lawmakers who say this has to stop right now.
“We cannot have folks that have information about a potential military target to be able to go on Kalshi and Polymarket … we cannot have people profiting off of (proposition) bets,” Rep. Blake Moore, R-Utah, told the Deseret News and KSL editorial boards this week.
‘Contracts,’ or bets?
Kalshi and Polymarket are two of the largest companies that offer “contracts” allowing people to wager on a wide variety of current events or sports. These “contracts” allow the American companies — such as Kalshi — to define themselves as offering commodities, which are governed by the federal Commodity Futures Trading Commission. Polymarket exists outside the U.S. Its governance is less clear, although more than 30 jurisdictions worldwide have banned it.
The Commodity Futures Trading Commission was established in the 1930s under laws that specifically exempted the trading of commodities from state gambling laws.
For nearly a century, the commission concerned itself solely with traditional commodities. However, modern prediction markets have sprung up lately as a way to circumvent gambling laws, including Utah’s absolute prohibition of it.
Several lawsuits have arisen, representing the claims of several states — including Nevada — that have their own gambling laws and regulations. The outcomes of some of these suits have been mixed. Clearly, this is a matter Congress should resolve. Absent that, however, the Supreme Court may eventually settle the issue. In which direction, however, remains uncertain.
The matter of the recently arrested soldier and alleged insider information on a military action ought to elevate this to an urgent matter of national security — one worthy of elected representatives. Absent that, the nation’s enemies will surely learn to follow prediction markets and pay close attention to unusual bets concerning certain times and places when an invasion or airstrike might occur.
Proposed laws
Moore is sponsoring legislation to rein in prediction markets. Utah Sen. John Curtis also is co-sponsor of a bill — the Prediction Markets Are Gambling Act — which would ban the Commodity Futures Trading Commission from offering any “contract” resembling a sports bet offered by any other casino-style game.
Earlier this year, Utah Sen. Mike Lee told the Deseret News in an email that this issue could be existential for Utah. “It would mean that Utahns are essentially blocked from representing their own values about gambling in their state laws, and that’s a bad thing.”
Unlike traditional sports gambling sites, the companies that offer “contracts” on current events and sports do not profit from losers. Each trader pays a fee to the company offering the “contract,” and the price is determined by the current market rate, which is another term for “odds.”
This issue is clouded by the money at stake, by advertising dollars, and by President Donald Trump’s confusing relationship to prediction markets. He recently stated his opposition. However, his social media platform, Truth Social, is said to be ready to launch its own prediction market called Truth Predict, and Donald Trump Jr. has advised Kalshi and Polymarket on business strategies, according to The New York Times and other news outlets.
The bottom line is that prediction markets contribute to the social degradation that accompanies all forms of gambling, regardless of the source. They go a step further by luring insiders to attempt to place personal gain above national security.
They must be reined in and made subject to state laws.