Stock Bets Put Prediction Markets Under Fresh Regulatory Scrutiny

Prediction markets for individual stocks and corporate metrics are rapidly expanding, drawing fresh scrutiny from securities regulators. Polymarket International and Kalshi lead the charge, with Polymarket traders placing over $220 million across roughly 31,000 stock-related markets by early September. Nvidia, Apple, and Tesla dominate the market, accounting for nearly 60% of the wagers, according to research firm Allium.

The platforms enable users to bet "yes" or "no" on whether a stock or index will hit a predetermined level by a specific date. While Polymarket International currently offers individual-stock contracts, Kalshi primarily focuses on indexes and corporate metrics. Securities lawyers warn that these markets, though smaller than the overall stock market, are growing rapidly enough to raise concerns about investor protection.

The SEC and CFTC are jointly considering which agency should regulate these products, with the SEC declining to comment for this story. Both companies claim to monitor for misconduct and refer cases to U.S. authorities, but the rapid pace of innovation has regulators concerned.