Por Matt Sedlar
Prediction market Kalshi is getting into the climate business. The company announced last week that it is pairing with The Weather Company to “bring trusted weather intelligence to the growing weather prediction market space.” Critics, however, warn that wagering on the climate crisis on betting platforms owned by companies with close ties to powerful politicians is a recipe for disaster.
If you’re unfamiliar with Kalshi, CEPR’s Brandon Novick has already written a great article on the topic of Kalshi and Food and Drug Administration drug approvals. The gist is that Kalshi and the similar site Polymarket are “prediction markets.” These sites allow users to “trade” money on predictions of whether something will happen, and if that sounds a lot like gambling, you are certainly not alone in making that connection.
Kalshi was the first prediction market, launching in 2020 after receiving approval to operate from the Commodity Futures Trading Commission (CFTC). The idea was that Kalshi would operate much like other commodity futures, such as oil and grains, but with future events being the traded commodity. The company has often touted itself as a public good, even going so far as to argue that students “purchasing contracts” on whether loan forgiveness would be approved during the Biden administration could earn money to pay off a loan. If that doesn’t sound like gambling, keep reading.
Prediction markets really gained prominence in 2024 during the presidential election, with users predicting Trump’s victory through trading. Kalshi likened the activity to polling. The CFTC disagreed. The commission had actually taken Kalshi to court before the election to place an injunction on election betting. The government claimed election betting was “unlawful activity and gaming” and “contrary to the public interest,” but a federal appeals court ruled betting could continue since the CFTC failed to prove “irreparable harm.”
And that has been the secret to Kalshi’s survival. The company has argued all along that it merely helps people understand various issues by crowdsourcing predictions. Ethically and morally, that is questionable (and in the case of Polymarket, which allows bets on events like wildfires, vile). But legally, aside from various cases of insider trading, it sits in a grey area. Because of its approval through the CFTC, Kalshi doesn’t face many of the regulations at the federal and state level that gambling sites do. This protected status is due to ample support for the platform on Capitol Hill. The company has attracted former Obama and Bidenadministration staffers, and Donald Trump, Jr. is on Kalshi’s payroll as a strategic adviser. However, at the state level, it is less popular. In the last year, Arizona, Nevada, and Washington state have gone after the platform in court, calling it an illegal betting and wagering system.
With the new category of climate and weather betting (see Figure 1), critics are concerned about the moral and ethical effects betting on life-and-death events can have on users. And to be clear, whether it’s a bet on the hottest year on record or whether a storm eventually reaches hurricane status, these events kill.
If you’re unfamiliar with Kalshi, CEPR’s Brandon Novick has already written a great article on the topic of Kalshi and Food and Drug Administration drug approvals. The gist is that Kalshi and the similar site Polymarket are “prediction markets.” These sites allow users to “trade” money on predictions of whether something will happen, and if that sounds a lot like gambling, you are certainly not alone in making that connection.
Kalshi was the first prediction market, launching in 2020 after receiving approval to operate from the Commodity Futures Trading Commission (CFTC). The idea was that Kalshi would operate much like other commodity futures, such as oil and grains, but with future events being the traded commodity. The company has often touted itself as a public good, even going so far as to argue that students “purchasing contracts” on whether loan forgiveness would be approved during the Biden administration could earn money to pay off a loan. If that doesn’t sound like gambling, keep reading.
Prediction markets really gained prominence in 2024 during the presidential election, with users predicting Trump’s victory through trading. Kalshi likened the activity to polling. The CFTC disagreed. The commission had actually taken Kalshi to court before the election to place an injunction on election betting. The government claimed election betting was “unlawful activity and gaming” and “contrary to the public interest,” but a federal appeals court ruled betting could continue since the CFTC failed to prove “irreparable harm.”
And that has been the secret to Kalshi’s survival. The company has argued all along that it merely helps people understand various issues by crowdsourcing predictions. Ethically and morally, that is questionable (and in the case of Polymarket, which allows bets on events like wildfires, vile). But legally, aside from various cases of insider trading, it sits in a grey area. Because of its approval through the CFTC, Kalshi doesn’t face many of the regulations at the federal and state level that gambling sites do. This protected status is due to ample support for the platform on Capitol Hill. The company has attracted former Obama and Bidenadministration staffers, and Donald Trump, Jr. is on Kalshi’s payroll as a strategic adviser. However, at the state level, it is less popular. In the last year, Arizona, Nevada, and Washington state have gone after the platform in court, calling it an illegal betting and wagering system.
With the new category of climate and weather betting (see Figure 1), critics are concerned about the moral and ethical effects betting on life-and-death events can have on users. And to be clear, whether it’s a bet on the hottest year on record or whether a storm eventually reaches hurricane status, these events kill.
While Kalshi claims it does not allow trading in cases of “war, assassination, terrorism, or other violent outcomes,” both Kalshi and Polymarket have been criticized for trading related to the assassination (or “ouster,” according to Kalshi) of Iran’s Ayatollah Ali Khamenei. The shifting positions and counterarguments claiming these trades are a public good reflect the morally flexible stances of these companies.
In a perfect world, Kalshi and Polymarket — along with the exponentially growing number of sports betting sites and apps — would not exist. Gambling and the income it collects is regressive, and as an activity, it leads to addiction, depression, and even suicide. But because they do exist, prediction markets need to be treated like what they are: gambling sites. That label comes with enforcement mechanisms established by the Interstate Wire Act of 1961 for states with conflicting gambling laws. These mechanisms include blocking access to sites entirely within a jurisdiction — as happened in Washington state — levying fines, or working with the Department of Justice to take further steps to ensure that the platforms comply with state laws.
Congress and the federal government need to take action to protect consumers and rein in prediction markets. There is no public good in determining that 2026 might be the hottest year on record. The goal is only to make money, and without more opposition from policymakers, they will keep doing it.
This first appeared on CEPR.
In a perfect world, Kalshi and Polymarket — along with the exponentially growing number of sports betting sites and apps — would not exist. Gambling and the income it collects is regressive, and as an activity, it leads to addiction, depression, and even suicide. But because they do exist, prediction markets need to be treated like what they are: gambling sites. That label comes with enforcement mechanisms established by the Interstate Wire Act of 1961 for states with conflicting gambling laws. These mechanisms include blocking access to sites entirely within a jurisdiction — as happened in Washington state — levying fines, or working with the Department of Justice to take further steps to ensure that the platforms comply with state laws.
Congress and the federal government need to take action to protect consumers and rein in prediction markets. There is no public good in determining that 2026 might be the hottest year on record. The goal is only to make money, and without more opposition from policymakers, they will keep doing it.
This first appeared on CEPR.
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