The plant just before the attack on Iran. How prediction markets are blurring the line between the stock market and the casino

Platforms like Polymarket estimate the probability of everything from election results to war outbreaks. For analysts, it is an innovative tool for examining crowd moods. For critics: a breeding ground for insider trading at the state level and a tool encouraging manipulation of reality.

Jens Nærvig Pedersen, chief analyst at Danske Bank, has gained a new work tool. Every morning, analyzing dollar rates and macroeconomic prospects, in addition to traditional reports and surveys, he checks predictive markets – led by the Polymarket platform.

This is where thousands of users place their bets on the future. Will the Iranian government collapse before the end of June? How many times will Elon Musk post on Platform X in a given week? Or even: will the US invade Cuba in 2026?

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– This is a completely new dimension of information. People trade based on the probability of a specific outcome, explains Pedersen. – Polls are not the same as market probability, and they are not updated on an ongoing basis. Polymarket allows us to price political uncertainty in real time.

Global “truth machine” or a breeding ground for abuse?

The mechanism is simple: each prediction is a “luck” costing from 1 to 99 cents, depending on the market probability. If the market values ​​the chance of an American invasion at 23 percent, you pay 23 cents. Can you hit it? You get a dollar. A mistake means the loss of your contribution.

The general director of Polymarket, 28-year-old Shayne Coplan, calls his project (already valued at the equivalent of several dozen billion zlotys) a “global truth machine”. However, the platform, and its main competitor Kalshi, operate in a huge ethical and legal gray area.

The list of controversies grows every month:

• Intelligence knowledge in the service of speculation: At the beginning of the year, Polymarket suddenly placed big bets on the US capturing Venezuelan President Nicolás Maduro. A few hours later, it actually happened and an anonymous player pocketed hundreds of thousands of dollars.

• Making money from war: Just a day before the US attack on Iran in March, 12 users bet on this scenario and won huge sums.

Nobel Prize winner in economics, Paul Krugman, doesn't bite his tongue. Using information from companies is illegal insider trading. But what do you call a situation in which someone uses access to national security secrets – such as plans to bomb a foreign country – for personal gain? – This word is high treason – Krugman recently thundered.

“Reality fixing”, i.e. bending reality

Critics point to an even darker aspect of the phenomenon. Emma Holten, a famous Danish author and debutant, warns against the so-called “reality fixing”, i.e. transferring match-fixing to the global arena.

– The market suddenly infiltrates reality. Given the appropriate financial motivation, people can resort to blackmail or bribery to achieve the outcome they want, explains Holten.

Sounds like a conspiracy theory? There are already examples. When a bet appeared on Polymarket about whether Ukrainian President Volodymyr Zelensky would appear in public in a suit (instead of his famous military-style outfit), the Internet went viral when Zelensky actually wore a suit-like outfit at the NATO summit in The Hague. In theory, he could bet money on it himself.

Another case was described by “The Wall Street Journal”: a correspondent from Israel was harassed and intimidated by players after he published an article about an Iranian missile attack. Users demanded that the text be corrected because they had bet money that the attack would not occur – publishing the newspaper meant a loss of capital for them.

Wisdom of the crowd with a significant flaw

So where does the credibility of prediction markets come from? It is based on the concept of “wisdom of the crowd”. The theory goes that if you ask a thousand people to estimate the weight of a cow, the individual shots will be extremely different, but their average will be extremely close to the truth.

However, Christian Borch, professor of sociology at the University of Copenhagen, advises caution. – The wisdom of crowds only works when individuals are independent of each other and represent a large diversity. We have no such guarantee on prediction platforms. This is a specific demographic: mainly young men who gain knowledge from the same information sources.

Still, Borch notes that these markets are reopening a 100-year-old wound in financial theory, blurring the line between legal stock market speculation and illegal gambling. – We are talking about gambling here, but dressed in financial logic – he adds.

The future is in doubt (and processes)

Politicians and regulators around the world are already responding. Canada, France and Germany banned Polymarket. A legal battle is underway in the USA – the state of Arizona sued rival Kalshi, treating the platform as an illegal bookmaker. The developers themselves prefer to call themselves “financial contract exchanges,” which would bring them under federal jurisdiction.

In the meantime, this trend is becoming a powerful political tool. Donald Trump Jr. is an advisor and investor in prediction markets, and the Trump family announced the creation of their own platform called Truth Predict.

As Jake Sullivan, former US national security adviser, recently summarized: “It's a huge phenomenon. We've never had to deal with something like this before, and in the last year it's exploded.

Will prediction markets change the architecture of global finance or will they be stifled by regulators? We don't know that. Interestingly, there is still no bet on Polymarket that would allow you to predict the future of the platform itself.

Borsen (Bonnier Group)/AO