Speculation is rife on the possibility of a U.S. invasion of Venezuela, the transfer of Venezuelan oil to the U.S., and potential future invasions in Colombia. This surge in inquiries has been driven by bets placed on prediction markets after the recent U.S. military intervention in Venezuela that led to the removal of President Nicolás Maduro.
The considerable amounts of money being wagered have drawn attention back to prediction markets, which have seen significant growth from small startups to major corporations. These platforms enable users to bet on a wide range of events and have gained popularity in recent years.
But how do prediction markets function, and what are the regulations governing them? Here’s a breakdown of the essential information.
How do prediction markets operate?
Most bets on prediction markets are binary, involving yes/no or higher/lower outcomes. For instance, on platforms like Polymarket, users can place bets on various events, from movie award nominations to geopolitical developments.
According to Tarek Mansour, CEO of Kalshi, the ultimate goal is to turn every difference in opinion into a tradable asset, as discussed at a conference in late 2025.
Among the various prediction market websites, Polymarket and Kalshi are prominent players. The total value of bets placed on the top five prediction markets has surged from $100 million US in early 2024 to over $13 billion US, as reported by crypto firms Keyrock and Dune.
Gambling, financial instrument, or informative tool?
A key distinction between sports betting platforms and prediction markets is the absence of a central “house” in the latter. Unlike traditional betting sites where the house is the counterparty, prediction markets facilitate bets between users or market makers.
While prediction markets generate revenue through small transaction fees, they are perceived as a form of peer-to-peer betting. This model has sparked debates about the potential regulatory implications and ethical considerations surrounding these platforms.
Despite claims of news value, prediction markets have come under scrutiny for the potential misuse of insider information. A recent successful bet on the ousting of Maduro before the military intervention raised concerns about the legality and ethics of such wagers.
U.S. Rep. Ritchie Torres has announced plans to introduce legislation prohibiting government officials from leveraging privileged information for betting on prediction markets. The regulatory landscape governing these markets, particularly in terms of preventing fraud and insider trading, remains a subject of ongoing debate.
Regulatory challenges and global perspectives
In Canada, binary options trading has been prohibited since 2017, leading to questions about the regulatory status of prediction markets. The lack of strict enforcement has allowed platforms like Polymarket to operate in a legal gray area, prompting calls for more robust regulations to protect users globally.
Experts emphasize the need for clearer regulations to address the challenges posed by prediction markets and ensure the integrity of financial markets. As the popularity of these platforms grows, regulators face the task of balancing innovation with investor protection to maintain market stability.</p