John Oliver took aim at prediction markets on his latest episode of Last Week Tonight, devoting a lengthy segment to platforms such as Kalshi and Polymarket.
Oliver traced the history of modern prediction markets to the University of Iowa, where economists built a prediction market in the late 1980s that began outperforming conventional polls.
The Pentagon briefly explored something similar after the terrorist attack on New York on September 11, a market through which analysts could bet on events in the Middle East, but Congress killed the idea.
Today’s version is considerably less restrained. Kalshi, now valued at $22bn after a recent funding round, received regulatory approval in 2020 as the first CFTC-licensed exchange.
Polymarket took a different route, launching without approval and later settling with regulators for $1.4m after being accused of operating an unlicensed exchange.
Its CEO, Shayne Coplan, had previously declined to characterise that as breaking the law, describing the company’s conduct instead as “incompatible with the regulatory matrix that existed”. Oliver was not convinced.
Around 90% of trading volume on Kalshi is sports-related, though both platforms have expanded aggressively into political and geopolitical events.
The comedian and talk show host noted that by classifying their products as event contracts rather than bets, the companies sidestep state gambling laws.
He also pointed out that they are also getting around the taxes and minimum age requirements associated with the regulated gambling sector, while simultaneously running advertisements that use the word “bet” freely.
An old game with new rules
Betting on political events is nothing new, and has been around for centuries. Bookmakers have historically offered markets on the timing of successions.
However, they have generally avoided direct bets on a leader’s death for PR reasons, instead focusing on “Next to Reign” or the timing of an abdication in the case of monarchs.
Wagering on the candidates for the next Pope has been a staple of European betting for centuries, with bookmakers opening markets the moment a Pope is incapacitated or passes away.
In the 1948 Italian general election, the state-run national lottery reportedly experimented with a betting pool regarding the composition of the new parliament.
Then, millions were wagered on the Brexit Referendum ahead of the 2016 separation.
Still, Oliver has difficulty reconciling political markets as suitable activity. In particular, he took aim at markets involving military action.
He said: “The impulse to try and make money betting on war or an unfolding tragedy is really dark. When someone dies, you’re supposed to send their family a card that says, ‘Sorry for your loss,’ and not one that says ‘Thanks for covering the spread’.”
Insider trading concerns resurface
On the question of accuracy, Oliver, who said the heads of Kalshi and Polymarket looked like two “extras in a Totino’s Pizza Rolls commercial”, was measured.
A recent paper found prediction markets performed roughly in line with professional forecasters on economic and Federal Reserve questions.
They have also had notable misses, however, including both platforms favoring Kansas City in last year’s Super Bowl, and Polymarket issuing a breaking alert the morning of the Texas Republican Senate primary projecting Ken Paxton would win with 83% probability. He lost.
The segment’s sharper material concerned insider trading, pointing out that one anonymous trader earned more than $400,000 ahead of the US seizure of Nicolás Maduro. In addition, two Israelis were charged with using classified military intelligence to place bets on Polymarket.
In March, a trader placed $87,000 on US strikes against Iran 71 minutes before the first bombs fell, collecting $515,000.
Polymarket’s CEO, asked directly at the time how the company guards against insider trading, described the dynamic as a feature rather than a problem, saying it creates a financial incentive for people with information to bring it to the market.
Oliver responded succinctly to that answer, with a simple “no”.
Regulatory oversight of the platforms sits almost entirely with the CFTC, which currently has one sitting commissioner, Michael Selig, a Trump appointee who has sued three states attempting to regulate the industry.
Donald Trump Jr. is a paid advisor to Kalshi and an unpaid advisor to Polymarket, Oliver pointed out.
He also noted that the Biden administration had moved to constrain some market activity, while the current administration has moved in the opposite direction.
Oliver: News outlets and prediction markets make for strange bedfellows
Oliver closed the segment by taking issue with news organizations that have entered paid partnerships with both companies. Dow Jones has partnered with Polymarket, while CNN, CNBC and Fox News are teaming up with Kalshi.
Oliver asserted that seeing Kalshi’s odds on a CNN news ticker was odd. He added: “I do not want the CNN ticker to have betting odds on news events.
“I don’t really want anything on there except maybe the odd distractingly weird headline that takes my mind off things for a second. You know, something like ‘giraffe escapes from zoo. Police say it has a gun.’ You know, something fun to Google later.”
Oliver argues that the arrangements lend credibility to platforms that researchers have found cause most casual users to lose money.
In his estimation: “[There] is something so grim about these sites turning every aspect of our lives into a bet. Because sure, money can be won on them. But in that happening, something also gets lost.”