If you could know the future before it happened, you’d never lose. But what if you could get the next best thing: the single most accurate, real-time prediction of what’s about to happen? That turns out to be worth quite a lot, and it already exists.
In 2024, regular political polling showed that Kamala Harris had a strong chance of winning the presidential election. But those who were watching the prediction market Polymarket were seeing something very different: overwhelming odds that Donald Trump would be the winner. The actual numbers on the night of the election indicated that while the pollsters didn’t know what they were doing, the prediction markets did.
That phenomenon has led to a number of controversies, including political ones. How freely should these markets be allowed to operate? Do they have any use beyond gambling? Do they hurt more than they help?

What They Are
Prediction markets are essentially online places where people can bet on an array of future events. These range from the outcomes of elections or sporting events to the direction of military actions by various countries or even the specific words a politician will use in a speech.
The major idea behind prediction markets is “the wisdom of the crowds”: the theory that an aggregation of individuals can predict an outcome more accurately than any single expert. In other words, the impressions and knowledge of one person aren’t enough to reveal any real truth, but when you gather a multitude of those perspectives, you may gain insight into what will actually happen. As this would apply to an election, individuals tend to have an idea of how the people around them plan to vote. By pooling these localized insights, the market transforms thousands of personal anecdotes into powerful, focused data points.
In practical terms, people place bets, each one totaling about a dollar between the two sides. For example, over the weekend, Polymarket had a market on whether Ayatollah Khamenei would be ousted as Supreme Leader by March 31 of this year. Buying a “yes” contract cost 21 cents, while buying a “no” contract cost 80 cents. You can also sell both contracts. The price for the contracts changes based on how much people are willing to pay for them.
If it turns out to be true (according to the specific rules as explained on the page), then the people with “yes” contracts will get the underlying dollar for every bet they made; if it turns out to be false, the “no” people will get the dollar. The fact that the price was much lower for a “yes” contract than a “no” contract suggested that people were more confident that Khamenei would not be ousted by March 31, essentially believing (as a group) that there is only a 21% chance of that happening.
Meanwhile, there was also a market for whether he would be out by December 31, and the “yes” contracts were selling for 51 cents.

What Are They Good For?

Does betting on events have any larger positive effect on society? Polymarket likes to claim that it does. For instance, on the ayatollah wager, the website made an apparent reference to the US attacks on Iran, trying to dispel criticism about betting on bombings:
“Note on Middle East Markets: The promise of prediction markets is to harness the wisdom of the crowd to create accurate, unbiased forecasts for the most important events to society. That ability is particularly invaluable in gut-wrenching times like today. After discussing with those directly affected by the attacks, who had dozens of questions, we realized that prediction markets could give them the answers they needed in ways TV news and X could not.”