AILSA CHANG, HOST:
Imagine betting on whether White House press secretary Karoline Leavitt says the phrase radical left at a briefing, or betting on how many measles cases there will be this year. Those are real bets that you can make on prediction markets today. Those markets are booming during President Trump's second term, but financial experts have deep concerns about this growing industry. NPR's Bobby Allyn has been covering this and joins us now. Hi, Bobby.
BOBBY ALLYN, BYLINE: Hey. What's up, Ailsa?
CHANG: Hey. OK. So for those of us who are not on these prediction market apps, how do they work exactly?
ALLYN: Yeah. So the two main prediction market apps are Polymarket and Kalshi, and they work in a pretty straightforward way. You make a bet, wait for an outcome, and then you make money or you lose money. They've been described as apps that turn the entire world into a casino because, well, you can bet on just about anything, right? There's the silly, like, will Costco raise its hot dog combo price this year to weather predictions. We're both in LA, Ailsa. Maybe we should look out a window and place a bet because you could bet on whether it will rain today in LA or not. And then there's just the downright disturbing, like placing bets on the extent to which Gaza will experience famine this year.
CHANG: OK. Well, just how popular are these apps?
ALLYN: More and more people are getting into them. Billions of dollars are traded on these apps every week. They collect a small fraction which can add up fast. Karl Lockhart is a law professor at DePaul University who studies these prediction markets, and he says they are the latest apps people see as a way of making quick cash.
KARL LOCKHART: People are struggling financially, and they're looking for sort of these lottery ticket-like payouts, right? If they can win big on a bet, then that's going to help them to just make it. And I think that that's sort of a sign of desperation in some ways and nihilism, frankly.
CHANG: Well, Bobby, I mean, this pretty much sounds like straight-up gambling to me. Like, how is this any different from gambling?
ALLYN: Yeah. And that's exactly what many states have been saying that have banned sports gambling. Sports betting is the most popular type of activity on these apps, but the apps have successfully convinced regulators that they are not gambling operations. So they're not regulated by state gaming commissions. They also say they're not like a stock market, so they shouldn't be regulated that way.
They argue they're a trading platform where people make bets on future events. And so they are regulated by the Commodity Futures Trading Commission. Under Trump, the CFTC dropped an appeal of whether it was legal to bet on election outcomes with the app. So now people are betting millions on the balance of power in Washington after the midterm.
CHANG: Interesting. OK. And how does the Trump administration's approach to these markets compare to, say, the approach the Biden administration took?
ALLYN: Yeah. It's really night and day. Back in 2022, Polymarket had been forced out of the U.S. FBI agents even raided the CEO's house last year. Now Polymarket is about to make a comeback. Officials in the Biden administration were especially worried about the election betting we were just discussing. I mean, imagine if a wealthy supporter of one candidate placed a big bet, could give the candidate momentum and maybe even influence how voters act.
The Trump administration doesn't share these concerns. In fact, the Trump family is fully embracing this industry. President Trump's son, Donald Trump Jr., is an advisor to Kalshi, one of the main prediction markets, and President Trump's own social media site, Truth Social, says it will soon unveil its own prediction market.
CHANG: Wow. OK. Well, how do executives at these prediction market apps themselves see this moment that they're now in?
ALLYN: They are absolutely jubilant. I mean, the CEO of Polymarket posted a photo of a white cake with sprinkles last month to commemorate the year anniversary of the FBI raiding his house just as the company is planning its return to the U.S. He wrote, cheers to free markets. And the CEO of Kalshi, Polymarket's main competitor, you know, he says he expects the prediction market industry to one day be bigger than the U.S. stock market and applauded the administration for allowing the industry to grow. But Ailsa, you know, experts I talk to are saying turning every aspect of life into a type of gambling scenario could just really reshape society in ways we can't even imagine yet.
CHANG: Totally. That is NPR's Bobby Allyn. Thank you, Bobby.
ALLYN: Thanks, Ailsa.
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