Prediction Markets Surge as Polymarket and Kalshi Gain Influence in Washington

Prediction markets are shifting from a marginal financial product to a potentially massive sector, with proponents arguing that the model could eventually rival traditional capital markets.

That expansion brings heightened concern about insider knowledge, manipulation, and the normalization of betting on political, economic, and cultural events. As the space grows, platforms Polymarket and Kalshi emerge as the dominant beneficiaries.

Both of these prediction market apps had tough regulatory pushbacks before their success. In 2022, federal regulators from the Biden administration stated that Polymarket operated an unregistered exchange in the US, leading to the blocking of American participants on the platform.

Authorities later examined whether US-based traders continued accessing the site by disguising their locations, an inquiry that led to a law enforcement search tied to the investigation. During the same period, the Commodity Futures Trading Commission (CFTC) barred Kalshi from listing election-related contracts, a restriction the company successfully overturned in court.

The regulatory environment has since shifted sharply under President Donald Trump. The Justice Department and the CFTC concluded their investigations into Polymarket, clearing the way for renewed activity. The CFTC also dropped its appeal in the Kalshi election-contract case.

Over the past year and a half, Polymarket and Kalshi have deepened their political connections, hiring prominent allies and gaining access to senior figures in government circles. The approach coincides with a broader acceptance of alternative finance under President Trump. 

The strategy has translated into rapid growth. Polymarket reaches a reported valuation of $9 billion, while Kalshi climbs to $11 billion. Both list Donald Trump Jr. as an adviser, and Polymarket also counts him as an investor. 

Kalshi partnerships draw scrutiny

As prediction markets expand and seek broader distribution, Kalshi's media deals are drawing political pushback. After Kalshi announced partnerships with major outlets in December, Arizona Rep. Abe Hamadeh wrote to CFTC Acting Chair Caroline Pham, saying constituents raised concerns about Kalshi's ties to CNN and warning that the collaboration poses threats to market integrity, democratic stability, and national security.

Kalshi's agreement with CNN names Kalshi as CNN's official prediction markets partner and includes plans to integrate Kalshi data into CNN programming. The arrangement also includes a Kalshi-powered real-time ticker during segments, powered by the company's data. It provides CNN newsroom and production teams with access to market data for building storylines and graphics.

Hamadeh explains that in situations where a large news organization with editorial control and tradable contracts for events exists, conflicts may arise. This will be more likely when it involves political issues, such as presidential or foreign policy issues.

His letter asks how the CFTC is reviewing the partnership under Commodity Exchange Act provisions that address event contracts involving elections, war, gaming, and other matters the agency may deem contrary to the public interest. He also questions what compliance controls Kalshi is expected to maintain to mitigate those risks.

He asked Pham to respond within 30 days.