Predict elections, crude prices, war
Despite the illegality in India, prediction markets are the new craze
When the new law on money-based online gaming came into play last year, the so-called prediction markets (PMs) were banned in India. Yet, across major cities, within select sections, people have got around it. It is a new craze, which is as addictive as money-based gaming. More importantly, PMs go beyond sports, and extend to politics, elections, business, and national security. For example, Indians are already betting illegally on the results of the forthcoming assembly elections in West Bengal and Tamil Nadu. Although the bet amounts are low, a few million dollars, the interest seems high, and growing.
According to a media report, despite the intense and dramatic clash in West Bengal, amidst the theatrics of the three bills that were defeated in Parliament, Trinamool Congress may scrape through. The same report claims the regional party, DMK, may emerge as a winner in Tamil Nadu. Of course, one is not sure, as any prediction, however scientific and rational it may be or seem, as is the case with poll surveys, can be wrong. In any case, PMs behave differently from normal betting. The former “reflect the collective beliefs of traders (bettors) regarding the likelihood of specific outcomes.” The ‘collective intelligence’ mechanism is believed to deliver “more accurate forecasts.”
According to a recent study, “By late 2025, PMs were processing over $2 billion in weekly transactions, with major events drawing hundreds of millions in wagers. They now permeate social media, retail-investment apps, and search engines, reaching millions of users, and operating as mainstream infrastructure rather than niche tools.” Their expanse grows because they enable easier access to both users and entrepreneurs through low entry barriers, and cryptocurrency. They are a craze in diverse markets across the US, Asia, Europe, and Australia. In India, PMs are gaining popularity after the gaming ban.
Yet, the downsides are the same as money-based gaming, and possibly more. First and foremost, they lead to manipulations, and insider trading. Recently, the American White House warned its employees about using inside information to bet on PMs, when it was leaked that insiders bet on crude prices twice, minutes or hours before the US’ decisions on Venezuela, and a stalemate in the Iran war. Senators introduced bipartisan bills to ban elected representatives, families, and employees to bet on PMs. Despite a federal court ruling (2024) that legalised event-based political contracts (one buys and sells contracts rather than place bets) on PMs, some sections remain opposed.
PMs, as per the earlier study, pose threats to democracy, via electoral shenanigans, and insider trading on classified information. The problem does not stem from the insider-trading cases like Iran and Venezuela, but invariably from thin liquidity, betting, or contract trading. “Low trading volume, and few participants mean even small trades can substantially shift prices, and manufacture the appearance of consensus, influencing political expectations rather than simply reflecting them, turning electoral ‘forecasts’ into instruments of influence rather than collective judgment,” explains the study. This is the case in normal betting, when huge flows of Indian money ruptures the existing odds, and forces the platforms to create new ones.
In the 2024 US presidential elections, a single trader reportedly bet $25-30 million on a Donald Trump contract. In the 2025 race for the mayor in New York, “trading was concentrated among a small number of accounts, including foreign participants.” More evidence is required to prove or disprove the allegations that the “shifts in perceived viability can increase support for frontrunners through candidate-quality interference, producing bandwagon effects in high-salience races.” While one is not sure, but knowing about lower value and volume of bets, the same may be true about the Indian elections.
Since the major financial platforms, and mainstream media display the PMs’ odds in real-time, it offers immense opportunities to speculators and manipulators to manage and massage the contracts. First, the credibility grants speculative probabilities, which is what PMs are, a veneer of respectability as objective forecasts, which they are not. Second, it allows traders to twist the odds by one-sided contracts. Third, although one does not realise, the beliefs of the traders shape the market probabilities which, in turn, influence the traders’ beliefs. It is a never-ending cycle that takes the wagers on different trajectories.
Although PMs are supposed to be more scientific, practical, and efficient compared to normal betting markets, and we are not sure about it, the former are as addictive, or possibly more addictive, than the latter. PMs exhibit similar structural and functional trends as online gaming. As per the study, “platforms deploy dark patterns (deceptive design elements), and nudges (prompts) to drive engagement, and impulsive trading.” Many platforms mirror the gambling features such as autoplay, countdown, visual feedback, leaderboards, loot-box-style token rewards, and timed prompts. These features turn forecasting into play, and “instant loss-chasing,” as users chase “fleeting sensations of foresight” rather than what they think, data and money.
However, unlike online sports betting, the PMs do not rely on the rush through rapid resolution. The latter provide unrestricted access, which facilitates distortions in behaviour. Anticipation, rather than resolution, “drives the dopamine reward loop. Hence, nearly 30 per cent of the users in PMs check hourly, and 10 per cent every minute, compared to 2.4 per cent, and 0.7 per cent, respectively, in online betting. Finally, the PM platforms create a “continuous stream of action even when primary contracts are slow-moving” to keep the users engaged. Terminological ‘washing’ is evident, forecasting, not betting.
Of course, the social harm is higher. Globally, more than 45 per cent of adults, and 18 per cent of teenagers gambled in the past year. Associated disorders are higher in the case of online gambling, up to 16 per cent. Despite the lack of studies, experts assume that the problems in PMs may be higher because of their unique features. There are the obvious economic costs, which are estimated at over 100 billion euros across the European Union, with low treatment access, and high dropout rates that range from 40 per cent to 70 per cent.
One need not forget that the business models of the gambling platforms, whether online betting or PMs, depend on the heavy users. The top fifth of the users, both in terms of volumes and values, generate more than 90 per cent of the revenues. However, such facts are hidden under the garbs of higher revenues through taxes, self-regulation measures, and the use of forecasting to replace betting and gambling. A game of chance becomes one of math, probability and, hence, skill.
