Prediction markets—once a fringe financial experiment—have surged into widespread use, now trading everything from election results to military operations. The shift from speculative side bets to a data-driven industry has blurred the distinction between gambling and financial forecasting, with major news outlets increasingly relying on these platforms.
In January, traders on Polymarket placed bets shortly before the U.S. launched a military operation in Venezuela, assigning high probabilities to success. One trader, using the account Ox31a56e, earned $436,759.61 on a wager that U.S. forces would capture Nicolás Maduro. The same account also bet on related events, including U.S. troop entry by January 31, with individual contract stakes ranging from $1,500 to $273,000. Polymarket, which runs on the Polygon blockchain, has not addressed whether insider involvement influenced these trades.
The market’s expansion reflects two key trends: for traders, it offers high-stakes speculation; for media, it provides faster data than traditional polling. The Wall Street Journal now integrates Polymarket’s probability estimates into its coverage, while CNN has partnered with Kalshi to embed live trading data into newsrooms. Forbes has labeled this trend “The Polymarket Effect”, emphasizing how markets resolve outcomes in hours rather than days.
Global Regulatory Battles Over Prediction Markets
Regulatory responses vary sharply by region. Australia classifies prediction markets as illegal gambling under the Interactive Gambling Act 2001. The Australian Communications and Media Authority (ACMA) blocked Polymarket in August 2025 after it offered contracts tied to Australian events, violating local laws. A warning issued in July 2025 preceded the ban, but Polymarket’s global operations, backed by investors including the New York Stock Exchange, have outpaced enforcement efforts.
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Steven Pettigrove, a partner at Piper Alderman, contrasts the U.S. and Australian approaches. In the U.S., platforms like Kalshi operate under the Commodity Futures Trading Commission (CFTC), treating prediction markets as regulated derivatives. The CFTC’s stance evolved under the Trump administration, dropping earlier objections to election-related bets. Meanwhile, Australia’s Australian Securities and Investments Commission (ASIC) banned binary options in 2021, citing $490 million in retail losses by 2018.
The regulatory split exposes a fundamental tension: prediction markets function simultaneously as speculative bets and financial instruments. Traders assign values between $0 and $1 in stablecoin, reflecting perceived probabilities. Last year, trading volume reached $27.9 billion, with some contracts exceeding $20 million in wagers. The sector is expected to grow to $95.5 billion by 2035, though its future depends on whether regulators classify these markets as gambling or investment products.
Legal Gray Areas Stymie Market Growth
Polymarket’s refusal to settle $10.5 million in Venezuela-related bets highlights legal uncertainties. The platform cited unclear definitions of “invasion” in its contracts, leaving room for disputes over event thresholds. Pettigrove notes that while U.S. platforms adapt to regulatory frameworks, Australia’s stricter stance may delay local adoption. He says that consequently, “We’ve seen legislation in the US proposed on insider trading in prediction markets.”
Australia’s regulatory crackdown has forced Polymarket to adjust operations, though the platform continues operating globally. The ACMA’s August 2025 ruling classified Polymarket as an unlicensed gambling service under the Interactive Gambling Act 2001, requiring a state license for legal operation. The authority determined the platform met the definition of a “regulated interactive gambling service” due to its wagering contracts on Australian events. However, Polymarket’s use of blockchain, specifically Polygon, has complicated enforcement, as transactions lack traditional financial trails.
