If you watch sports or scroll social media, you have probably seen ads for Kalshi or Polymarket. These apps call themselves prediction markets or exchanges, and they describe what users do as trading. For many people, the experience is the same as betting, and so are the losses.

What prediction markets are

A prediction market lets you buy a contract that pays out if something happens: a team wins, a candidate is elected, a price crosses a certain level. If you are right, the contract pays. If you are wrong, you lose what you put in. Sports contracts have become one of the biggest draws, and Kalshi controls roughly 90% of the U.S. prediction market, according to reporting by LAist.

Because these platforms are regulated as commodities exchanges rather than casinos, they have been available in states where sports betting is still illegal, and to users as young as 18 in states that set the sportsbook age at 21.

Most users lose money

In July 2026, the Pew Research Center analyzed nearly 12,000 active Polymarket accounts over a six-week period. It found:

• 56% of users lost money during that time.
• 9% lost more than $1,000, while only 7% gained more than $1,000.
• Among the most active users, those making 1,000 or more trades, one in three lost more than $1,000 in just six weeks.
• The typical user placed dozens of trades and was active about one day in four. Sports traders were the most active group.

Why clinicians are worried

Prediction markets combine features that gambling researchers have long linked to harm: constant availability, fast results, small repeated bets and the feeling of skill. The apps run around the clock with live prices that move like a stock chart. That design can pull people into checking and trading all day.

Therapists are already seeing the effect. LAist reported in July 2026 that Los Angeles clinicians are treating more young people whose gambling started on prediction markets, including clients who had been in recovery from sports betting and relapsed once these apps became available. A Northwestern Mutual study cited by Axios found that 32% of Gen Z adults use sportsbooks or prediction markets.

Even the industry has acknowledged the risk. In May 2026, Kalshi became the first prediction market to join the National Council on Problem Gambling, committing $2 million over two years to support what it called trader health and safety.

A legal fight still being settled

More than a dozen states have taken enforcement action or filed lawsuits against Kalshi over its sports contracts. Federal appeals courts are split: the Third Circuit sided with Kalshi in a New Jersey case, while the Sixth and Ninth Circuits ruled against it in cases involving Ohio, Tennessee and Nevada. The question may reach the U.S. Supreme Court.