New York City shoppers lined up in Greenwich Village on Thursday for the grand opening of The Polymarket, a free grocery store. The market — perhaps a nod to New York mayor Zohran Mamdani’s proposed city-run grocery stores — is only operating through 7 p.m. on Sunday.
But its namesake sponsor, a prediction market that allows users to trade binary “yes” or “no” contracts on the outcome of real-world events, from the Super Bowl coin flip to Federal Reserve rate cuts, appears to be here to stay.
That didn’t always appear to be the case. In 2022, the Commodity Futures Trading Commission fined Polymarket $1.4 million for operating as an unregistered derivatives market and forced the firm to block U.S. users.
The company continued to operate offshore, and in July 2025 spent $112 million to acquire QCEX, the holding company for a regulated and licensed options trading platform. The move paved the way for U.S. federal regulatory approval, which the firm received in November. The firm has relaunched a beta version of its app in the U.S., which is gradually being rolled out to users who sign up to be on a waitlist. Polymarket is not disclosing how many users it currently has.
Polymarket and rival prediction market Kalshi are currently embroiled in legal battles at the state level, where regulators in states including Nevada, New York and New Jersey say that trading event contracts on sports amounts to gambling that falls under state jurisdiction and is taxed differently than financial markets.
State regulators in Massachusetts recently won an injunction against Kalshi in court, which temporarily banned the firm from offering sports-related contracts in the state.
In response to the lawsuit, a Kalshi spokesperson told CNBC, “Massachusetts is trying to block Kalshi’s innovations by relying on outdated laws and ideas.” The company said it is “ready to defend [its technology] once again in a court of law.”
This week Polymarket filed a lawsuit against the state, in which the company’s representatives say Polymarket hopes to avoid “imminent and irreparable harm arising from Massachusetts’s enforcement of state gambling laws against federally regulated derivatives exchanges.”
In the meantime, customer money continues to pour in. Kalshi’s CEO estimated the firm saw more than $1 billion in trades on the Super Bowl. That includes $100 million in trades coming on which song halftime performer Bad Bunny would perform first alone.
The mechanics of prediction markets
So how does this all work? Prediction markets run on event contracts, financial instruments that essentially let you buy a share in the outcome of an event. The price of those shares ranges between $0 and $1, with the value reflecting the likelihood of your chosen outcome coming to fruition.
Ahead of the Super Bowl, contracts predicting that the Seattle Seahawks would win on both Polymarket and Kalshi cost $0.68, per Barron’s, implying a 68% chance of a Seattle victory according to these markets. At the game’s final whistle, all Seattle contracts bought at any price went to $1 per share. All New England Patriots contracts went to $0.
Unlike a traditional casino, those buying events contracts aren’t playing against the “house.” Rather, platforms like Polymarket and Kalshi allow traders to buy and sell contracts among themselves, with the companies collecting a small fee on each trade. The more money piles in on the “yes” or “no” side of a particular event, the more expensive that contract gets.
For example, shares predicting a Seahawks victory in the Super Bowl, increased closer and closer to $1 the more it became apparent that Seattle was going to win.
Importantly, investors can buy or sell their options at any time before the event is over. Say you picked “yes” on a fringe political candidate to win an election at $0.05. Then, a month later, that candidate made a landmark speech that boosted popularity. After more money comes in on your candidate, the price is now $0.10. You could hang onto your shares if you think they may go higher (or actually win) or you could sell them for double what you paid.
Essentially, these markets provide real-time odds on future events, according to a crowdsourced pool of people who have skin in the game.
On some level this has always been the case, says Stephane Ouellette, co-founder and CEO of digital asset investment bank FRNT Financial. Some who understood the intricacies of oil futures, for instance, could suss out whether political tensions in the Middle East might boil over, he says.
“There’s been a huge innovation where now we’re turning these markets into more digestible information that a retail trader can now understand,” Ouellette says. “Whereas before you needed like a Ph.D. in market analysis to be able to figure this out.”
Tread carefully putting money behind your predictions, experts say
Whether buying contracts on prediction markets constitutes gambling akin to making a bet with a sportsbook is up for legal debate. But the distinction is moot when it comes to investing and managing your money, says Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management.
“It’s that old adage, you’ve got to know how much you’re willing to lose,” he says. “It’s no different than if you go to Vegas with your friends.”
Of course, no matter how convicted you may feel on the future outcome of a particular event, you’d be wise to not make prediction contracts a major part of your investing strategy, financial pros say.
At most, they belong in an “opportunity portfolio,” says Doug Boneparth, a CFP and founder of Bone Fide Wealth. This sleeve of your portfolio, which might constitute 5% to 10% of your investable assets, is reserved for riskier plays such as individual stocks, cryptocurrencies, niche exchange-traded funds and maybe a prediction or two, Boneparth says.
The rest of it generally belongs in a broadly diversified portfolio of investments you plan to buy and hold for the long term, he says. The thinking here is that, even if your predictions end up going to zero, the loss won’t be enough to derail your financial plans.
“Most retail investors should be approaching investing as a long-term consistency and discipline game. That’s how you quietly compound your returns over time,” Boneparth says. “So while [prediction markets] may be a piece of the puzzle, and I think it’s a little bit of a stretch, it definitely would go into that more speculatory opportunity bucket.”
Johnson recommends thinking of prediction markets as part of your entertainment budget, the same way you might think about what you spend each month on a hobby like golf. That way, you’re doing it for fun, and whether you turn a profit on your predictions is incidental, he says.
“If I make money, great,” he says. “But when you start getting into, ‘I’m going to do this because I’m smarter than everybody else, and I’m going to pay my mortgage with it,’ that’s when you that’s you have a problem.”
Disclosure: CNBC and Kalshi have a commercial relationship that includes a minority investment.
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