# Growth and regulatory scrutiny of prediction markets > Live situation record from CLSTR: https://clstr.news/situations/growth-and-regulation-of-prediction-markets > Updated: 2026-08-21T09:34:00.000Z. Sources: 29. Developments: 7. Prediction markets are transitioning from niche cryptocurrency experiments into a rapidly expanding financial sector. While attracting interest from retail investors and corporate treasuries, the industry faces significant institutional hurdles. Ambiguous settlement mechanisms and governance gaps have reportedly driven the cost of capital up by approximately 150 basis points in recent quarters. Regulators, including the U.S. Securities and Exchange Commission, have noted that a lack of standardized contract finality acts as a barrier to adoption. Platforms are pursuing diverse models to achieve mainstream acceptance: Polymarket blends blockchain with centralized user experiences, Kalshi operates under CFTC oversight, Rain Trade enables permissionless market creation, Robinhood has integrated event contracts, and FanDuel Predicts extends the model to sports media. Trading activity is increasingly concentrated on pricing geopolitical risks. Recent activity on Polymarket shows high volumes in markets concerning maritime traffic in the Strait of Hormuz—which has seen $16.1 million in traded volume—and the status of the Iranian naval blockade, attracting $9.5 million. The sector is also expanding into digital gaming, with Metaspins integrating prediction markets into its crypto-based platform. Legal and regulatory scrutiny is intensifying. In New York City, the City Council is investigating Polymarket, Kalshi, Coinbase, and Gemini Titan for allegedly ‘predatory,’ ‘false,’ and ‘deceptive’ marketing, specifically regarding the targeting of minors via social media influencers. In Baltimore, a lawsuit has been filed against Kalshi, Polymarket, Robinhood, Webull, and Coinbase, alleging they operate unlicensed sportsbooks by disguising wagering as ‘event contracts.’ New security concerns have emerged regarding insider trading and national security. The Anti-Corruption Data Collective (ACDC) identified 152 wallets on Polymarket that successfully traded on undisclosed U.S. military actions, suggesting potential leaks of privileged data. In Canada, banks such as RBC and Scotiabank have restricted staff from using prediction markets to speculate on corporate metrics due to insider-trading concerns. ## Claims - Prediction markets have grown more than 380 per cent globally in less than a year. (corroborated by 3 sources) - Gabriel Perez made more than $143,000 by predicting Donald Trump's speech content. (corroborated by 3 sources) - Gabriel Perez was Donald Trump's teleprompter operator. (corroborated by 3 sources) - Prediction market providers are illegal to operate in Australia. (corroborated by 3 sources) - The Australian Communications and Media Authority (ACMA) admits using a VPN to circumvent geo-blockers is legal. (corroborated by 3 sources) - Prediction markets produce better forecasts than polls, pundits, or models. (corroborated by 3 sources) ## Timeline ### 2026-08-21: Prediction markets face scrutiny over security and insider trading risks Prediction markets are facing scrutiny over national security risks in the US and insider trading concerns in Canada, leading to bank restrictions and warnings about leaked military data. 2 sources. https://clstr.news/cluster/prediction-markets-face-scrutiny-over-security-and-insider-trading-risks ### 2026-08-18: Prediction markets see 380% global growth amid regulatory challenges Prediction markets have grown 380% globally in a year, offering high-return bets on future events. While useful for forecasting, they face regulatory challenges and concerns regarding gambling risks. 3 sources. https://clstr.news/cluster/prediction-markets-see-380-global-growth-amid-regulatory-challenges ### 2026-08-14: New York City Council investigates prediction markets Polymarket and Kalshi The New York City Council is investigating prediction markets Polymarket and Kalshi over allegations of deceptive marketing and potential targeting of minors and vulnerable populations. 2 sources. https://clstr.news/cluster/new-york-city-council-investigates-prediction-markets-polymarket-and-kalshi ### 2026-08-14: Baltimore sues Kalshi and Polymarket over unlicensed sports betting allegations Baltimore has sued prediction markets Kalshi and Polymarket, alleging they operate unlicensed sports betting services, while also naming Robinhood, Coinbase, and Webull as defendants. 2 sources. https://clstr.news/cluster/baltimore-sues-kalshi-and-polymarket-over-unlicensed-sports-betting-allegations ### 2026-08-12: Prediction markets face legal probes in New York and Baltimore Prediction market platforms Polymarket and Kalshi face investigations in New York City over predatory marketing and lawsuits in Baltimore alleging illegal, unlicensed sports betting. 16 sources. https://clstr.news/cluster/new-york-city-council-investigates-polymarket-over-predatory-marketing-allegations ### 2026-08-10: Prediction markets expand into geopolitical risk and gaming Prediction markets are expanding, with traders using platforms like Polymarket to bet on geopolitical stability in the Strait of Hormuz and Metaspins integrating event-based trading into its gaming ecosystem. 4 sources. https://clstr.news/cluster/prediction-markets-expand-into-geopolitical-risk-and-gaming ### 2026-08-03: Prediction Market Platforms Face Institutional and Regulatory Hurdles Prediction markets are growing but face institutional reluctance due to ambiguous settlement rules and regulatory uncertainty; platforms like Polymarket, Kalshi, Rain Trade, Robinhood and FanDuel are leading a 3 sources. https://clstr.news/cluster/prediction-market-platforms-face-institutional-and-regulatory-hurdles --- Cite as: Growth and regulatory scrutiny of prediction markets. CLSTR, https://clstr.news/situations/growth-and-regulation-of-prediction-markets