Prediction markets' push into US stocks raises regulatory alarm bells

Prediction markets are expanding into US stock trading, sparking regulatory concerns over investor protection and oversight. Companies like Polymarket and Kalshi have been pioneering this industry, allowing punters to bet on corporate events that often impact stock prices. Over the past year, these markets have begun offering tens of thousands of markets on stock moves, company data, and other corporate events.

While still a small part of the overall stock market, equity-linked prediction markets create a new venue for speculating on US securities outside traditional protections and market surveillance rules. Legal experts warn that rapid growth in these markets could eventually influence trading in the underlying shares and make it harder for regulators to police the market.