Myths & Facts
The attacks on prediction markets rely on a handful of recurring claims.
Here is what the record actually shows.
MYTH: Prediction markets allow insider trading to flourish.
FACT: Insider trading is illegal on prediction markets under the Commodity Exchange Act and CFTC rules. Every user is identity-verified through KYC. Platforms run continuous surveillance built specifically for prediction market activity, supported by independent integrity firms. The high-profile insider trading scandals routinely cited in media coverage almost all trace back to offshore platforms that operate with no identity verification at all.
MYTH: Prediction markets are the wild west — an unregulated gray area.
FACT: Licensed U.S. prediction markets are regulated by the Commodity Futures Trading Commission, the same federal agency that has overseen complex derivatives markets for decades. The CFTC enforces 23 core principles covering market integrity, customer protection, and transparency. Leading platforms hold both Designated Contract Market and Derivatives Clearing Organization licenses.
MYTH: Members of Congress and government officials can insider trade on prediction markets.
FACT: CFTC regulations specifically prohibit trading on misappropriated government information, and regulated platforms enforce additional rules against trading by government officials. The same Commodity Exchange Act provisions that have long applied to commodity markets apply here.
MYTH: People can trade anonymously on prediction markets.
FACT: Regulated prediction markets require full identifying information before a single trade can be placed — name, address, date of birth. Anonymous trading is a feature of offshore platforms, not U.S. regulated exchanges.
MYTH: Prediction markets are just another form of sports betting.
FACT: Sports event contracts are one slice of a broader universe that also includes economic indicators, weather, elections, and policy outcomes. More importantly, the structure is fundamentally different from a sportsbook. Regulated prediction markets do not act as the house. They match buyers and sellers on a peer-to-peer exchange and charge a transparent transaction fee. The platform does not profit when customers lose, and it does not ban users for winning.
MYTH: Federally regulated prediction markets hurt state tax revenues from sports betting.
FACT: State sports betting revenues have continued to grow alongside the rise of prediction markets. Federal and state markets can and do coexist — federally regulated hedging markets coexist with state-regulated insurance, and the same model applies here. The data from the American Gaming Association confirms that state gaming revenues are up, not down.