What Californians risk by betting on prediction markets

By William Lu, especially for CalMatters

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California has seen what happens when technology platforms grow faster than public understanding.

Social media companies have long argued that their products are neutral tools. But parents, schools, attorneys general and young people describe a different reality. They say these platforms are designed to hold attention, reward repeat checks and keep users engaged.

California’s legal system is catching up. Attorney General Rob Bonta is leading a lawsuit against Meta that claims Facebook and Instagram were designed with addictive features which harmed young consumers. And in March, a jury from Los Angeles found Meta and Google responsible in another closely watched case of social media addiction.

This story should matter as prediction markets enter the American mainstream.

Polymarket, for example, is not Instagram or Snapchat. This is not a social media feed. And to be fair, it doesn’t work without rules. Polymarket US is listed by the Commodity Futures Trading Commission as a designated contract market and has published rules against insider trading, fraud and market manipulation.

These precautions matter. They help protect fairness in the marketplace.

But market integrity is not the same as civic integrity.

Prediction markets allow users to commercial contracts for the outcome of future eventssuch as elections, interest rates, court decisions, government actions, international conflicts and economic indicators.

In theory, these markets can gather information and show what people believe is likely to happen. This is the strongest argument in their favor and should not be dismissed.

The problem is what happens when public life becomes marketable entertainment.

Elections are not just a price signal. It decides who holds the power. The decision on the interest rate is not simply the result of the contract. It affects mortgages, credit cards, small businesses and household budgets. A societal crisis is not just a market opportunity. It affects families, communities and real people.

When everything becomes a bet, it becomes easier to separate yourself from the human stakes.

California should not wait for this detachment to become normal. State lawmakers, attorneys general, and consumer protection officials need to start setting expectations now for products that sit somewhere between financial markets, gambling platforms, and citizen information tools.

This does not mean banning every prediction market or pretending that predictions have no value. This means asking whether anti-fraud rules are enough when the product itself can change people’s attitudes towards democracy, public crises and shared civic life.

A sensible framework in California should start with the basics: strict age verification, clear risk disclosure, deposit limits and cooling-off periods.

Platforms should be limited by markets for marketing predictions such as easy money or civic entertainment. And they must monitor and report suspicious trading, insider risks and market manipulation.

California should also consider whether certain markets should be banned, especially those related to violence, disasters or public tragedies. There is a difference between predicting the weather and making a market around human suffering.

Elections deserve special attention. Betting on politics risks changing people’s attitudes towards democracy.

The voter must see the election as a collective decision about the future, not primarily as a chance to profit from instability. If contracts for political events grow without clear rules, public trust may become another casualty.

The goal should be a prediction market that is transparent enough to be useful, limited enough to be safe, and regulated enough to earn public trust.

California doesn’t have to be anti-tech to be pro-garbage. It can support innovation by asking the question: Are we building tools that help people understand the world, or tools that train people to bet on it?

The country has been through this cycle before. First comes the exciting new platform. Then comes mass adoption. Then come the damages, lawsuits and years of regret.

California doesn’t have to wait for the lawsuit this time. It should write the rules while the market is still young enough to form.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.