Australian investors are closely watching as top prediction market platforms, Kalshi and Polymarket, navigate a significant surge in suspicious trades this year. These platforms, which allow users to buy and sell binary ‘yes’ or ‘no’ contracts tied to various event outcomes, from economic policies to elections, have seen their popularity soar. Kalshi, founded in 2018, enables trading on verifiable future events, while Polymarket, launched in 2020, functions as an event contracts exchange. The increase in questionable activity coincides with booming trading volumes and heightened scrutiny from lawmakers and regulators.
Since the start of the year, Kalshi has probed and flagged over 400 suspicious trades, more than double the number investigated throughout last year, according to sources. Some of these incidents have been referred to the US derivatives regulator, the Commodity Futures Trading Commission (CFTC). Similarly, Polymarket has also observed a significant uptick in flagged suspicious trades during the same period. Identifying bad actors on these platforms poses a unique challenge. Joseph Grundfest, a former Securities and Exchange Commission commissioner, noted that while corporate insider trading often involves readily identifiable parties with non-public information, similar data is often difficult or impossible to collect for some prediction markets.
Despite the integrity concerns, the growth of these platforms has been substantial. Kalshi reported annualised trading volumes tripled over the past six months, reaching $178 billion. Polymarket’s monthly notional trading volumes across its platforms touched approximately $10.3 billion in April, a sharp increase from $3.8 billion last year. This growth has propelled their valuations, with Kalshi recently valued at $22 billion and Polymarket in talks for a $15 billion valuation. Both platforms are actively implementing new safeguards, including updated rules prohibiting bets made using confidential information, and the CFTC has begun crafting specific prediction market regulations to address the burgeoning sector.
