Long read: What Happens When Everything Can Be Bet On?

Predictions are hard, especially the ones about the future”, a quote often attributed to Niels Bohr, the Nobel winning physicist, was meant to suggest the futility of forecasting. Unless, if you can use the wisdom of crowds or even better inside information. Turns out, there is now a legitimate business that combines both and is thriving. They are called Prediction Markets.

“Prediction markets like Kalshi and Polymarket beat traditional pundits on America’s 2024 election. When cable news anchors were hedging their forecasts and pollsters were heading toward consensus, Polymarket had Trump at 58% when polls showed a coin flip. The same pattern emerged with corporate earnings calls. geopolitical events and even HBO documentary conclusions.

Polymarket CEO Shayne Coplan, famously calls his platform: “the most accurate thing we have as mankind right now,” highlighting that betting markets provide superior insights than polls by reflecting actual conviction and risk, not just opinion…

Weekly volumes now routinely exceed $2 billion, up from below $500 million in 2024. Polymarket has 500,000 monthly active users. Kalshi claims 4 million retail participants. But volume alone doesn’t explain the accuracy. This didn’t occur by happenstance, or it wasn’t a “bug.” These markets were more accurate because insider trading became a feature embedded into its business model.”

The business model whilst involves transaction fees from users, is more lucrative because of the embedded information in this trading data:

“Having accurate predictive data is worth orders of magnitude more than transaction fees….Sports dominate because the regulatory framework is already established. It’s the safe onramp that builds liquidity and validates the platform. But the economics only work long-term if prediction markets can monetize information asymmetry in categories that matter to Wall Street: economic data, corporate events, geopolitical risks.

…The value chain works like this – insider traders push markets toward accurate pricing. That accurate pricing becomes valuable data. That data gets packaged and sold to institutional clients who can arbitrage between prediction markets and traditional financial markets.”

The blog illustrates insider trades citing a few examples such as the bets on Maduro’s toppling or the success of Google Gemini 3 ahead of their events, things statistically hard to prove without ascribing insider knowledge: “When someone who actual knowledge about the upcoming release of an AI model or the product lines at a luxury car brand and which one is likely to be released at a chosen price point, they create a signal with their decision(s). When Polymarket has a market on quarterly earnings and someone with board access starts betting aggressively on beats, that information is worth something to anyone trading the actual stock.”

Surely this must be illegal? Unlike financial markets that are regulated, prediction markets aren’t:

“In every case, insider traders made money and faced essentially no consequences…The regulatory arbitrage is intentional. Polymarket runs on Polygon wallets with pseudo-anonymous identities. You can create a wallet, trade with insider knowledge, cash out and there’s no practical way to trace it back unless you’re dumb enough to publicly admit what you did.”

Furthermore, it is also legal to use prediction market ‘insight’ to bet on real financial markets: “If Polymarket or Kalshi shows someone with clear insider knowledge betting heavy on earnings beats, you can front-run that information in the actual equity markets. The faster you get the data, the more you can extract.

…If you don’t have inside information, you can track insider trading patters via infamous trackers like Finviz, OpenInsider and SEC EDGAR Database. Politicians have 45 days to report trades so by the time you find out the opportunity has often passed. Everyone talks so much about Nancy Pelosi, she wasn’t even top 10 this year or the last. If it was real time, I’d be following Brian Higgins for sure. He is absolutely crushing it. Large sudden bets from new accounts in illiquid markets are often informed traders. Tools exist to monitor this activity. Piggybaacking on whale trades has worked over 50% of the time based on historical patterns.”

 And it is only getting increasingly more legit. Consider these:

“The NYSE invested $2bn in Polymarket in 2025, with plans to integrate Polymarket data into the exchanges….Kalshi also raised $1bn at an $11bn valuation on 5th Dec 2025, double what it was worth two months prior. Polymarket then sold a 20% stake to ICE at an $8bn valuation and is reportedly seeking more funding. Kalshi co-founder Tarek Mansour thinks “prediction markets could rival stock markets in size.”

…Polymarket was fined $1.4m by the CFTC in 2022 and had to wind down US operations. Then the Trump administration eased regulations and ended investigations. Polymarket acquired QCEX, a CFTC-licensed exchange, for $112m, enabling legal US operations. After Donald Trump Jr.’s venture firm invested $10m, he became a senior advisor at the firm.”

The blog ends on this rather sombre note: “[Prediction markets are] financializing information itself, making insider trading a feature rather than a felony, and buildling a business model around the accurate pricing of future events via legal grey zone exploitation. They could either act as a “crystal ball” aggregating the wisdom of crowds for the public good, or as a “weapon” in the hands of those who can sway the crowds. The truth likely lies in between, and will depend on the safeguards, transparency, and culture that develop around these markets.”

If you want to read our other published material, please visit https://marcellus.in/blog/

Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.