This is the introduction to Checks and Balance, a weekly, subscriber-only newsletter in which our writers turn their gaze to the latest political developments in America.
Sign up to Checks and Balance here.
I am not a sports fan. To be clear, I enjoy watching some games; I just don’t have the energy to take them seriously. I have limited pity for the fans who, on watching this weekend’s Super Bowl, will feel real anguish when giant men in one shade of polyester score fewer points than giant men in another shade of polyester. I can muster only so much enthusiasm for grown-ups throwing a ball to each other.
Why, then, should I—or anyone—be bothered that nearly $1.8bn is expected to be legally wagered on this year’s Super Bowl? In addition to caring little about sport itself, I share this liberal newspaper’s view that adults should be free to take risks with their own money. Yet I am wary of the cultural impact of betting, for now primarily on sport, but increasingly on everything from the colour of the Super Bowl’s Gatorade to the date the new Fed chair will be confirmed.
Sports betting has taken off since 2018, when the Supreme Court allowed states to regulate it. The past year has seen a new surge in activity on prediction markets, with “event contracts” traded on digital platforms. In October 2024 a federal court ruled that Kalshi, a prominent prediction market, could offer “Congressional Control Contracts”, which let individuals wager on the outcome of that year’s congressional elections. In July federal investigators abandoned probes into Polymarket, another platform.
Will new guardrails emerge? A number of states are suing Kalshi, arguing that its futures contracts amount to sports betting and should therefore be subject to state rules. But new federal restrictions are a long shot. On Wednesday the Commodity Futures Trading Commission (CFTC) withdrew a proposed rule from the Biden administration banning event contracts on elections. The CFTC said it would “advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act”. Sure.
In the past year prediction markets have been embraced not just by Donald Trump junior, who is an advisor to Polymarket and Kalshi, but by traditional financial players. The chief executive of Charles Schwab, a staid brokerage, recently noted the markets’ value as a source of hedging and data. In October the owner of the New York Stock Exchange took a 25% stake (worth $2bn) in Polymarket—sort of like a fogey in a brass-buttoned sportcoat going big on psilocybin. Everyone’s doing it.
As these markets mature, they may become less risky. Or not. The most obvious dangers are gambling addiction and related financial distress. The introduction of online sports betting in states after 2018—activity that is subject to more regulation than prediction markets—has been associated with a 12-point decline in average credit scores, reflecting higher rates of bankruptcy and loan delinquencies.
The cultural damage matters, too. At their best, sports represent one of the rare rituals that unite and inspire Americans. Even I can acknowledge the collective thrill that fans feel when watching a fellow mortal dart through 250-pound linebackers to catch a football mid-air. But if games are seen as compromised—recent months have brought cheating scandals in professional basketball and baseball—the ritual is hollowed out. And when gambling becomes central to sport, it risks shifting from a shared spectacle to a personal financial wager.
More worrisome is the taint that betting culture might impart on arenas with real consequences. On Kalshi you can trade on the likelihood that Congress will extend health-care tax credits or pass a voter-identification law. That provides a new means for corruption. It will almost certainly increase the perception of it. And there is a more subtle, but insidious danger: that Americans, whose opinion of government is already low, increasingly view public policy not as a tool for the common good, but as an opportunity for personal profit. Donald Trump treats everything as a transaction; prediction markets encourage ordinary Americans to do the same.
What’s your view of prediction markets? On the Checks and Balance podcast this week, I spoke about them with my colleagues James Bennet and Dan Rosenheck. Dan is our in-house expert—he’s so good at betting on sports that some platforms have banned him, as he recounts in a fantastic piece. I also spoke with Danny Funt, the author of an excellent new book on sports betting. I hope you enjoy our conversation. Share your thoughts at checksandbalance@economist.com.
