CNN's partnership with Kalshi introduces a significant ethical risk. While prediction markets can offer data-driven insights, their integration into mainstream news creates a feedback loop where actors can manipulate markets with relatively small sums of money to generate favorable headlines and influence political outcomes.

New platforms frame betting on future events as sophisticated 'trading,' akin to stock markets. This rebranding as 'prediction markets' helps them bypass traditional gambling regulations and attract users who might otherwise shun betting, positioning it as an intellectual or financial activity rather than a game of chance.

Prediction markets like Polymarket operate in a regulatory gray area where traditional insider trading laws don't apply. This creates a loophole for employees to monetize confidential information (e.g., product release dates) through bets, effectively leaking corporate secrets and creating a new espionage risk for companies.

Foreign adversaries, particularly from the Middle East and China, are weaponizing political prediction markets. By funding ads that display skewed betting odds, they aim to create a false sense of momentum or inevitability for a candidate, representing a novel and subtle form of election interference designed to sow division.

Beyond finance and sports, prediction markets offer a powerful tool for governance. Policymakers can create markets on the potential outcomes of proposed policies (e.g., reducing unemployment). This provides a stronger signal than polling because participants have real financial 'skin in the game,' revealing true market sentiment.

The true value of prediction markets lies beyond speculation. By requiring "skin in the game," they aggregate the wisdom of crowds into a reliable forecasting tool, creating a source of truth that is more accurate than traditional polling. The trading is the work that produces the information.

Prediction markets are accelerating their normalization by integrating directly into established ecosystems. Partnerships with Google, Robinhood, and the NYSE's owner embed gambling-like activities into everyday financial and informational tools, lowering barriers to entry and lending them legitimacy.

Terry Duffy distinguishes between large-scale political events like a presidential election and smaller, local races. He argues that a prediction market on a local mayoral race with only a few hundred voters could be easily manipulated, as an actor could potentially buy the election to ensure their market prediction pays off.

Analysis shows prediction market accuracy jumps to 95% in the final hours before an event. The financial incentives for participants mean these markets aggregate expert knowledge and signal outcomes before they are widely reported, acting as a truth-finding mechanism.