- Prediction markets volume hits $29.8B, up 588% YoY as Polymarket and Kalshi dominate.
- CFTC Chair denied insider trading claims and confirmed enforcement within the first 100 days.
- Profit concentration is high, with 0.1% of accounts capturing 67% of gains on Polymarket.
CFTC Chair Mike Selig pushed back against claims that insider trading is widespread in prediction markets. He said the idea that enforcement rules are unclear is false and does not match how the agency operates.
Selig pointed to actions taken during his first 100 days. The agency upgraded its monitoring systems and pursued legal cases against rule breakers. He stated that anyone using inside information will face prosecution under federal law.
The response directly targets criticism raised in a Wall Street Journal opinion piece that framed prediction markets as loosely regulated betting platforms.
Jurisdiction Fight and Regulatory Line
Selig made it clear that the Commodity Futures Trading Commission holds full control over prediction markets under the Commodity Exchange Act. He rejected arguments that these platforms fall into a grey zone.
He warned that overregulation would push activity offshore. The transition would remove oversight and expose markets to manipulation from foreign actors. The agency’s stance is to keep markets onshore, regulate them, and enforce existing laws.
Prediction platforms like Polymarket and Kalshi operate as regulated exchanges with clearing systems and investor protections similar to other derivatives markets, according to the CFTC.
Market Growth Pulls in Retail Flow
The defense comes as prediction markets expand fast. Combined monthly volume reached $29.8 billion, up 588% year over year. Capital is flowing in despite rising criticism.
Polymarket and Kalshi dominate the sector, with reported valuations of $15 billion and $22 billion. Activity ranges from politics to culture.
Users buy contracts tied to outcomes. A contract priced at $0.20 pays $1 if correct. The pricing implies odds, but the mechanics mirror betting. On Kalshi, about 90% of activity comes from sports markets. Fees are embedded in trades, similar to bookmaker margins.
Data Shows Retail Losses Piling Up
User data tells a different story from the growth narrative. Over 70% of Polymarket users are losing money. Out of 1.6 million analyzed accounts, just 0.1% captured 67% of total profits. Fewer than 2,000 accounts made nearly $500 million.
Most users lose small amounts. Typical losses range from $1 to $100. The bottom 10% lost around $4,000 each. Another study covering November 2022 to March 2026 found 68.8% of users were in the red. At the same time, 1% of traders controlled 76.5% of profits.
Losses extend across platforms. On Kalshi, losing users outnumber winners by 2.9 to 1. Data from over 35,000 markets shows contracts priced at a 50% probability only paid out 40% of the time.
Retail traders often buy at the first listed price. This behavior leads to an average loss of 11% per trade. The return is worse than standard casino slot machines.
Related: New York Governor Signs Executive Order to Ban State Employees from Prediction Markets
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