A short history of prediction markets: from Wall Street election betting to Kalshi and Polymarket
People have bet on elections for centuries. The story from papal conclaves and the Curb Exchange to the Iowa Electronic Markets, Intrade, PredictIt, Kalshi’s court wins and Polymarket’s return to the US, and what each era taught us.
In this article
Prediction markets feel new, but betting on the future of politics is centuries old. What changed is the technology, the law and the amount of money involved. This is the short version of that history, and what each era taught us about how well crowds with money at stake can forecast.
Before the modern era
- 16th century: in Rome, people wagered on who would be elected pope, and in 1591 Pope Gregory XIV banned betting on papal elections.
- 1868–1940: in New York, betting on presidential elections was big, organised business. From the 1880s much of it ran through brokers on the Curb Exchange, the forerunner of the American Stock Exchange, and newspapers printed the odds daily. In 1916 alone, bets worth roughly $200 million in 2008 dollars changed hands. Economists Paul Rhode and Koleman Strumpf found the markets were remarkably accurate: in only one election, 1916, did the clear betting favourite a month before the vote lose.
- 1940s: the markets faded, squeezed by anti-gambling laws, the arrival of scientific polling and the growth of sports betting.
The academic revival: 1988–2000
In 1988 economists at the University of Iowa, frustrated that polls had missed an upset in that year's Michigan caucuses, launched the Iowa Electronic Markets (IEM), small real-money markets on election results. The CFTC later gave it formal permission to keep running, with a cap of $500 per trader. Over the following presidential elections the IEM beat the polls most of the time, showing that even small markets could aggregate information well.
Play-money sites followed, such as the Foresight Exchange (1994) and the Hollywood Stock Exchange (1996), which priced films and stars.
The Intrade era: 2001–2013
In 2001 an Irish company launched what became Intrade, a real-money exchange for politics, current events and more. Its election odds were quoted everywhere in 2004 and 2008. In 2003 the US Defense Department's research agency, DARPA, cancelled a planned "Policy Analysis Market" after senators objected to markets on geopolitical events, including terrorism.
In November 2012 the CFTC sued Intrade for offering off-exchange options to Americans. Intrade cut off US customers and shut down in March 2013. The lesson of the era: prediction markets were popular and useful, but in the US they had no clear legal home.
Superforecasters and forecasting platforms
From 2011 to 2015 a US intelligence research agency ran forecasting tournaments. The Good Judgment Project, led by Philip Tetlock, won by finding "superforecasters", ordinary people who consistently beat experts. Metaculus launched in 2015 as a forecasting platform without money (what is Metaculus), and later Manifold brought play-money markets anyone could create (Manifold explained).
PredictIt and crypto markets: 2014–2020
- 2014: PredictIt opened under a CFTC no-action letter to a New Zealand university, with an $850 limit per contract (PredictIt review).
- 2018: Augur launched on Ethereum, a decentralised market with no company in charge, which struggled with usability and liquidity.
- 2020: Shayne Coplan launched Polymarket, using stablecoins on a blockchain. In November 2020 the CFTC designated Kalshi as a regulated exchange for event contracts, the first of its kind; it opened in 2021.
The legal battles: 2022–2024
- January 2022: Polymarket settled with the CFTC for $1.4 million and blocked US users from its main site.
- August 2022: the CFTC withdrew PredictIt's letter; PredictIt sued and kept operating.
- September 2023: the CFTC rejected Kalshi's contracts on which party would control Congress. Kalshi sued.
- September 2024: a federal judge ruled for Kalshi, and in October 2024, weeks before the presidential election, Americans could legally trade election contracts on a regulated exchange for the first time.
- November 2024: billions of dollars traded on the US presidential election, most of it on Polymarket, whose odds were cited across the media. A week after the election the FBI searched Coplan's home; in 2025 the Justice Department and the CFTC closed their investigations without charges.
The boom: 2025–2026
- January 2025: Kalshi launched sports contracts, starting the fight with state gambling regulators that is still in the courts.
- 2025: brokers such as Robinhood brought event contracts to millions of users (Robinhood prediction markets). PredictIt won a settlement that raised its limits. Polymarket bought a licensed US exchange, received CFTC approval in November and began its US return; ICE, the owner of the New York Stock Exchange, agreed to invest up to $2 billion.
- 2026: Polymarket introduced trading fees and its own dollar token, pUSD; Kalshi's valuation reached $22 billion; Congress opened an inquiry into insider trading on prediction markets; and New Jersey asked the Supreme Court to decide whether states can regulate Kalshi's sports contracts. The latest developments: prediction market news.
What history teaches
- Markets forecast well, from the Curb Exchange to Polymarket, but favourites still lose sometimes (how accurate are prediction markets).
- The law decides who can play. Every era ended or changed when regulators acted, and the current boom rests on court rulings that are still being appealed.
- Liquidity is everything. The markets that mattered, from Wall Street in 1916 to Polymarket in 2024, were the ones with the most money and traders.
History of prediction markets: frequently asked questions
What was the first prediction market?
Betting on elections is centuries old; organised election markets ran in New York from the 1860s. The first modern electronic one was the Iowa Electronic Markets in 1988.
Why did Intrade shut down?
The CFTC sued it in 2012 for offering unregistered contracts to Americans, and it closed in March 2013.
When did Kalshi become legal?
The CFTC designated it as an exchange in November 2020; it won the right to list election contracts in court in 2024.
When was Polymarket founded?
In 2020, by Shayne Coplan.
