Prediction Markets: The New Side Hustle That Looks a Lot Like Gambling

Prediction markets, sometimes known as event futures markets, let you trade on the likelihood of future outcomes. Instead of betting against a traditional bookmaker, users buy and sell shares on “yes” or “no” propositions (e.g., election results).

In prediction markets, you’re trading directly against other participants rather than a house, and you can buy or sell your positions at any time before the market resolves to lock in your profits or cut your losses.

Why some people think forecasting is a real skill

Supporters believe that prediction markets reward information-gathering rather than luck. Unlike a slot machine or lottery ticket, prediction markets offer opportunities for participants to improve their odds through research.

Some academic research has even found that prediction markets can sometimes outperform expert panels and public opinion polls when forecasting future events.

Successful traders often study economic data, corporate filings, scientific studies, or industry developments before placing trades.

Take, for example, the case of Caleb Davies, an IT professional from the Minneapolis suburbs who turned $14,000 in family savings into over half a million dollars.

According to one New York Times article, Davies achieved his success by scraping website data to bet on niche prediction markets, such as Spotify and Rotten Tomatoes rankings. He targeted cultural trends that major Wall Street firms usually either ignore or avoid due to strict internal data rules.

Stories like these fuel the belief that prediction markets can reward genuine expertise.

The problem is that finding a persistent edge is far more difficult than it appears.

Legally speaking, prediction markets and gambling aren’t the same thing.

Platforms such as Kalshi operate under federal financial-market regulations and are overseen by the Commodity Futures Trading Commission (CFTC). Traditional sportsbooks, by contrast, generally operate under state gambling laws.

Supporters argue that this distinction is meaningful

Gambling usually involves betting against a house that builds a mathematical advantage into the odds, which guarantees profits for the operator and losses for most players over time. In prediction markets, prices are determined by supply and demand, and there is no built-in house edge dictating long-term outcomes.

The distinction matters from a regulatory perspective, but critics say it may feel irrelevant to users who are still risking money on uncertain outcomes.

Some critics say prediction markets and gambling are the same 

Many lawmakers and regulators argue that prediction markets and gambling are functionally the same because both involve risking money on uncertain future outcomes.

“Without question, it’s a loophole,” former New Jersey Attorney General Matt Platkin told CNN, which has a partnership with Kalshi and uses its data to cover major events.

“This is why states put common-sense age restrictions on gambling, drinking, and other forms of dangerous behavior.”

Experts say it’s just as addictive

While prediction markets aren’t legally defined as gambling, some say the psychological and addiction risks are virtually identical.

“The more people gamble, the more activities they gamble on, and the more ways they gamble, the more likely they are to develop a problem,” Lia Nower, director of Rutgers University’s center for gambling studies, told The Guardian.

“On average, unregulated markets like Kalshi and Polymarket will have an additive effect to the legal forms of gambling. This will likely contribute to increasing rates of problem gambling in the years to come.”

Some traders have reportedly earned hundreds of thousands or even millions of dollars by identifying mispriced markets before the broader public catches on.

But data suggests that most users lose money.

If you’re an everyday user logging on to make a quick buck, you are likely acting as “fish” for institutional sharks. According to a Wall Street Journal investigation, 67% of the profits on Polymarket are taken by just 0.1% of the platform’s accounts.

Over 70% of Polymarket users are in the red, with the average user losing between $1 and $100, and the bottom 10% losing an average of $4,000 per person. Kalshi similarly sees about 2.9 unprofitable users for every profitable one.1

Large trading firms usually make the most money

According to the article by The Wall Street Journal, recreational traders—like one unemployed user who lost a $41,000 bankroll on a single celebrity bet—are routinely wiped out. Meanwhile, trading firms run by math prodigies and backed by millions of dollars in live data feeds generate substantial profits.

Most casual users react to news they see on social media. By then, it’s too late. Large firms use complex algorithms that scan news wires and execute trades in milliseconds. By the time a human can click “Buy,” the price has already adjusted, which leaves the casual trader to buy at the least profitable moment.

“A lot of these traders are actually firms who are paying money for data and for servers, and they’re winning big by placing tens of thousands of trades every single day,” Neil Mehta of The Wall Street Journal told Fox 32 Chicago.

In other words, prediction markets sometimes feel less like a side hustle and more like professional poker, where a handful of experts earn significant profits while most casual participants provide the liquidity that makes those profits possible.

Another criticism of these markets is that they encourage people to financially benefit from wars, natural disasters, political unrest, public-health crises, and other forms of human suffering.

When almost every real-world event becomes a tradable asset, society may risk viewing major events primarily through the lens of a profit opportunity.

“The world as a hedge fund, where everything can be a derivative,” Charlie Warzel wrote for The Atlantic. “Greed is good.”

On the flip side, as research has found that forecasts can perform better than experts, some believe that these accurate forecasts may help governments, businesses, and institutions prepare for future risks.

Whether that benefit outweighs concerns about financializing human events remains an open debate.

The gamified design draws in younger users

Because prediction markets often operate under financial regulations rather than gambling regulations, some platforms permit participation at age 18 rather than 21.

This allows these companies to target that “critical” three-year window of cognitive development for teens and adults, who experts say “are more vulnerable to developing problematic gambling behavior and addiction than older adults,” according to one article by Fast Company.

“Sportsbooks and prediction markets are treating young people like a gold rush, flooding the internet with advertisements and promotions to hook them on gambling when they’re young,” said Senator Richard Blumenthal of Connecticut.

“High schoolers, even middle schoolers, are now gambling on their phones as never before, losing real money and creating life-altering addiction.”

It’s not hyperbole, either. Some research has shown that 1 in 3 boys gamble before they even turn 18, which reinforces a need for stricter legislation on advertising. 2

Prediction markets also face many of the same integrity concerns that exist in traditional financial markets.

Insiders benefit from prediction markets, too

In April 2026, the US Department of Justice announced that US Army Special Forces Master Sergeant Gannon Ken Van Dyke was arrested for allegedly using classified information to bet on the capture of Venezuelan President Nicolás Maduro.

Van Dyke, who was involved in the planning and execution of the January 3, 2026 raid reportedly won over $400,000 on the prediction market Polymarket.

While prediction markets can be extraordinarily effective at aggregating information, they can also reward those with access to information others do not have. Not everyone is confident that most insiders will be punished similarly to Dyke.

Questions have also emerged around market manipulation

One notable example occurred during the third-quarter 2025 earnings call for the cryptocurrency exchange platform Coinbase.

CEO Brian Armstrong intentionally mentioned several keywords that traders were actively betting he would say (“Bitcoin, Ethereum, blockchain, staking, and Web3”) to resolve outstanding prediction markets where traders had placed around $84,000 in total wagers.3

Although Armstrong told The New York Times that he was “just having a little bit of fun,” others argued that markets based on the actions of public figures can be vulnerable to manipulation, particularly when the subject is aware of the market’s existence.

As prediction markets expand, regulators will probably face more pressure to determine where forecasting ends and market abuse begins.

At a time when many people feel financially squeezed, the idea of earning money through intelligence, research, and forecasting is attractive. But the reality is considerably less glamorous.

The rise of prediction markets may represent the birth of a new “betting economy,” but that does not necessarily make forecasting a practical side hustle for the average person.

Like stock trading or sports betting, prediction markets reward a minority of highly skilled participants while extracting losses from a much larger group.

Before viewing forecasting as a path to financial freedom, it may be worth asking yourself a simpler question: if prediction markets are truly a side hustle, why do so few people actually make money from them?