Screens display the logo and home page of U.S. cryptocurrency-based prediction market platform Polymarket in Saint-Mande, France on April 29.MARTIN LELIEVRE/AFP/Getty Images
It’s ripe for financial manipulation, compromised by the Trump business empire, and coming soon to an investing platform near you, in one form or another.
Prediction trading, which would allow legal betting on real-world events, has a toehold in Canada. And now that the likes of Toronto-based online investment service Wealthsimple have approval to offer a limited form of betting, its explosive growth is all but inevitable. The challenge for Canadian regulators is keeping out the fraud and abuse that that prediction markets in the United States have seemed incapable of controlling.
Financial markets in general have a growing trust problem. U.S. President Donald Trump’s personal accounts actively trade in stocks he has the power to influence. Insiders and government officials are cashing in on privileged information related to U.S. military strikes and tariff announcements. Suspicious trades pile up moments before major policy announcements hit the wires.
The public already has good reason to question the integrity of the financial markets, and the rise of prediction trading will only fuel their suspicions that the markets have been corrupted.
Is Canada ready for prediction markets? Ask us your questions
Stocks, commodity futures, and crypto markets have all been darkened by the cloud of insider trading recently. But predictions contracts are increasingly the tool of choice for illicit trades.
It’s happening in ways big and small. There have been some high-profile cases, such as the U.S. solider who allegedly turned his knowledge of the operation to capture then Venezuelan president Nicolás Maduro into roughly US$400,000 on Polymarket. Mr. Maduro was ousted in January.
At the other end of the spectrum, an anonymous trader made US$14,000 for betting that the temperature in Paris would exceed 22 C one day in April. The problem is, the city peaked at just 18 C that day. One theory is the bettor tampered with a weather sensor using a battery-powered hairdryer.
There is a great deal more questionable activity going undetected.
A recent New York Times investigation homed in on 80 Polymarket users making highly suspicious bets among more than 11,000 accounts with some indicators of possible insider trading.
Prediction markets see surge in suspicious trades as popularity explodes
At least seven users made US$1.4-million between them by betting on a U.S. ceasefire with Iran in April, in the hours before the President broke the news on Truth Social. Another Polymarket account placed a single bet on the cryptocurrency Ether being approved by the Trump administration. It was low-odds wager that netted US$50,000.
In the Trump family, the prediction markets have both a powerful backer and a beneficiary.
Mr. Trump himself has cleared the way for the industry’s ascendancy. The agency in charge of regulating predictions trading, the Commodity Futures Trading Commission, has been gutted, leaving as its sole remaining commissioner a corporate lawyer for crypto and prediction markets.
The Trump administration has also sued six different states to block laws that prohibit or restrict predictions trading.
This policy direction just so happens to be in line with the Trumps’ financial interests. Donald Trump Jr. is an investor in Polymarket and an advisor to the New York City-based sports betting company Kalshi – the two giants of the industry. Trump Media even has plans to launch its own prediction platform called Truth Predict.
What does this add up to? We have a President boosting an industry to the benefit of his family. Same with crypto, after the Trump meme coin pumped more than US$100-million in fees into the family coffers it left retail investors with billions in losses. Mr. Trump’s own accounts have made some 3,500 stock trades during his second term. And sensitive information about major policy announcements to come keeps finding its way into financial trades, many of them on platforms in which the Trumps have a financial interest.
Can you blame an everyday investor for feeling like the markets are fixed?
One red flag in prediction trading is when underdog trades win too often. In most categories on Polymarket, these trades were successful 14 per cent of the time – about what you would expect, according to an April report by the Washington-based Anti-Corruption Data Collective.
In political markets, the success rate of longshot bets rose to 25 per cent, the group’s analysis showed. And when it comes to longshot bets on military events, the success rate spiked to 52 per cent.
“The inherent risk of information asymmetries mean these markets are not a fair and level playing field,” the report said.
For better or worse, it’s a playing field Canadians will soon get their chance to play on.