Prediction markets are becoming large enough that regulators no longer treat them as a niche crypto experiment.
On September 10, the European Securities and Markets Authority warned that prediction markets create serious investor-protection and market-integrity risks, including insider trading, wash trading and coordinated manipulation.
The warning came the same day Polymarket appointed veteran finance executive Warren Jenson as its first chief financial officer.
Jenson previously held CFO roles at Amazon, Electronic Arts, Delta Air Lines and Nielsen.
The combination is revealing.
Prediction markets are professionalizing at exactly the moment regulators are asking whether their market structure is mature enough to handle that scale.
Reuters reported that Kalshi and Polymarket generated a combined $48.4 billion of trading volume in August, with Kalshi accounting for roughly $40 billion.
This is no longer a small corner of online speculation.
It is a major trading category.
Why prediction markets have grown so fast
Prediction markets convert uncertain future events into tradable contracts.
Users can buy positions tied to outcomes such as elections, sports, central-bank decisions, economic data, wars, product launches and commodity prices.
The appeal is simple.
News becomes a market.
Instead of arguing about whether something will happen, users can express a probability through price.
That makes prediction markets useful not only for gambling-like speculation but also for forecasting and hedging.
A company exposed to an election result or policy decision can theoretically use event contracts to offset risk.
That broader utility is one reason the category is attracting institutional attention.
The insider-trading problem is structurally different
Prediction markets can create forms of information advantage that are even harder to regulate than stock-market insider trading.
In equities, securities law has decades of precedent defining material nonpublic information and fiduciary duties.
Event markets can involve information held by government officials, military personnel, campaign workers, sports teams, corporate employees, journalists and contractors.
A person may know the outcome of an event before the public because they are directly involved in creating the event.
Should they be allowed to trade?
The answer is not always obvious under existing rules.
This is the problem ESMA is highlighting.
Crypto makes surveillance harder — but also more transparent
Some prediction markets settle through crypto rails.
That creates a paradox.
Pseudonymous wallets can make participant identity difficult to determine.
But blockchain transactions can be permanently visible.
A suspicious wallet may be traceable across years of activity.
The hard part is connecting the wallet to the person with inside information.
This means prediction-market surveillance needs both:
transaction analytics
and
identity intelligence.
Neither alone is sufficient.
Why Polymarket’s CFO hire matters
Hiring a first CFO is a corporate-maturity signal.
Prediction markets are no longer being run like experimental consumer apps.
They are managing large trading volumes, international expansion, regulatory relationships, partnerships and potentially complex financial controls.
Polymarket has also been hiring senior executives and building mainstream partnerships.
That suggests the company expects prediction markets to become a durable financial category.
But institutionalization brings higher expectations.
A market processing tens of billions of dollars cannot rely on informal governance.
It needs compliance, controls and credible market surveillance.
Kalshi’s market-share lead changes the competitive narrative
Polymarket was once the dominant cultural brand in prediction markets.
But Reuters cited Piper Sandler data showing Kalshi at roughly $40 billion of August volume out of $48.4 billion combined.
That is a major shift.
Kalshi’s regulated U.S. structure gives it a different distribution path.
It can integrate more easily with mainstream brokerage platforms and regulated counterparties.
Polymarket retains powerful global brand recognition and crypto-native distribution, but it now faces pressure to professionalize quickly.
The competition is no longer simply about which platform has better markets.
It is about regulation, liquidity, distribution, market integrity and product breadth.
Why it matters
Prediction markets are crossing the boundary between entertainment and financial infrastructure.
That changes the regulatory question.
A small betting market can be treated as a niche consumer product.
A market with tens of billions of dollars in monthly volume can influence media narratives, public expectations, political behavior, financial hedging and price discovery.
Once market prices become news themselves, manipulation becomes more consequential.
A coordinated group does not necessarily need to profit directly from a manipulated market.
It may want to create a misleading probability that influences headlines or voters.
That makes market integrity a public-information issue, not just an investor-protection issue.
Wash trading is especially dangerous in probability markets
In a conventional token market, wash trading can make volume look larger than it is.
In prediction markets, manipulation can also distort perceived probability.
If traders push a contract from 40 cents to 60 cents, casual observers may interpret the move as new information.
Media outlets may report that an outcome now has a “60% chance.”
But the price may reflect thin liquidity or strategic trading rather than genuine consensus.
This is why liquidity depth matters just as much as headline probability.
A market price is a forecast only when the market itself is robust.
The U.S.-Europe divide is growing
The United States has become more permissive toward regulated prediction-market products.
Europe remains more cautious.
ESMA’s warning highlights this divergence.
If prediction markets continue to expand in the U.S. while remaining restricted in much of Europe, platforms may face increasingly fragmented regulatory models.
That creates opportunities for jurisdictions willing to host the industry.
It also creates compliance complexity for global platforms.
Risks and counterarguments
Prediction markets can produce valuable forecasts.
Studies have often found that market-based probabilities can aggregate dispersed information effectively.
Insider trading is also not unique to prediction markets.
Traditional securities, commodities and sports betting all face similar problems.
The existence of abuse therefore does not imply the entire category should be prohibited.
The more useful question is whether surveillance and enforcement can mature as quickly as volume.
What to watch next
Watch Polymarket’s CFO-led financial controls, Kalshi versus Polymarket volume share, enforcement actions involving insider trading, market-surveillance technology, identity and KYC rules, sports-contract disputes, European regulatory decisions, institutional partnerships, brokerage integrations and liquidity depth on high-profile political markets.
Prediction markets have proven there is enormous demand to trade uncertainty.
The next test is whether they can build enough market integrity to become trusted financial infrastructure.
FAQ
How large are Polymarket and Kalshi?
Reuters reported combined August trading volume of $48.4 billion, based on Piper Sandler data.
Which platform was larger in August?
Kalshi accounted for about $40 billion of that volume, significantly more than Polymarket.
What did ESMA warn about?
ESMA highlighted insider trading, wash trading, coordinated manipulation and retail-investor risks in prediction markets.
Who is Polymarket’s new CFO?
Warren Jenson, a veteran executive who previously held CFO positions at companies including Amazon, Electronic Arts, Delta Air Lines and Nielsen.